Agriculture Minister Sharad Pawar on Thursday said the processed food industry is facing problems due to the existing tax regime and hoped the implementation of the proposed goods and services tax (GST) would benefit the sector.
On growth potential of non-alcoholic beverages sector, he said major players are planning to invest around $ 10 billion by 2020 in this segment and advocated reforms at state level to make the sector globally competitive.
“The processed food industry has some issues with existing tax structure. ...I am hopeful that the implementation of the proposed single goods and GST will be beneficial for this sector,” Mr. Pawar said at an event here.
Mr. Pawar also released an ICRIER report that suggested major reforms including GST for improving global competitiveness of Indian non-alcoholic beverages sector.
On the GST issue, think-tank ICRIER countered some of the popular beliefs and said: “For instance, all survey participants pointed out that allowing foreign direct investment (FDI) in multi-brand retail alone cannot bring down inflation or help to streamline the supply chain, as has been envisaged by the government.”
“It will depend on whether a GST is implemented and how the food processing sector in general and the non-alcoholic beverage sector in particular is treated under the GST. The treatment of the sector has to be such that it faces uniform low tax and other fiscal and regulatory barriers to the inter-state movement of goods are addressed,” it said.
The report also suggested that India should learn from the experiences of countries such as the UK, Canada and Australia that have used low taxes to streamline the agro-supply chain.
ICRIER strongly recommended that bottled water should be taxed at par with juices to increase affordability as access to safe and hygienic potable water is limited in India.
“There should be uniform low taxes for all non-alcoholic beverages across different states for consumer health and safety reasons,” the report said.
Last week, Food Processing Secretary Siraj Hussain had said there was still not much clarity on how food products would be treated under the proposed indirect tax regime GST.
“The industry may wish to have all food products exempted from GST, but that is unlikely. In my sense, it is better (that) food products are covered under GST and let the prices of mass consuming goods be kept lower or else the purpose of GST will be defeated,” he had said.
Goods and Services Tax (GST), touted as India’s most far-reaching indirect tax reform, aims to remove barriers to movement of goods and services across states.
The Empowered Committee of State Finance Ministers is deliberating on the revised draft of the Constitutional Amendment Bill for introduction of the Bill.