Rice millers across the State and Agricultural Produce Marketing Committee (APMC) Yard, Yeshwanthpur, Bengaluru, will shut down on Friday, as a protest against the Union government’s decision to levy 5% GST on all packaged and labelled food products, even if unbranded, essentially covering most of the essential food items. The Finance Ministry issued notification of the new GST rules on Thursday.
The move will lead to inflation, make small retailers in the unorganised sector uncompetitive, and even affect farmers, industry insiders allege. Farmers also petitioned Chief Minister Basavaraj Bommai, a member of the GST Council, against the 5% GST on food products.
Ramesh Chandra Lahoti, vice-president, Federation of Karnataka Chambers of Commerce and Industry, and a foodgrain merchant, said post the GST regime in 2017, a majority of brands went unbranded to avoid coming under the tax net. “Today, most of what I sell in the shop is unbranded. In an attempt to bring these under the tax net, the government has imposed a blanket 5% GST on all packed and labelled food items, without understanding the market clearly. Now this will lead to a 5% price hike on almost all food articles, burdening the consumer,” he said.
Consumer Price Index (CPI) inflation for June 2022 has been 7.01%, just marginally low from 7.04% in May. The new 5% GST rule will directly contribute to food inflation, industry insiders say.
This has raised concerns over how it will affect the poor. “The impact of the pandemic, high inflation and joblessness are already severe and it is evident in stress on nutrition observed during recent field trips to Vijayapura district. Many of the poor have mostly given up on vegetables and pulses, eating a very watery sambar or eating rice or roti with gunpowder. Now, 5% GST on most food items will further put pressure on nutrition security,” said nutritionist Sylvia Krapagam.
Shivakumar S, Secretary, Karnataka State Rice Millers’ Association, said 5% GST on unbranded packed food will also lead to reduction in the selling price of farmers in an attempt to maintain competitive prices in the market. Federation of State Farmers’ Organisation petitioned Mr. Bommai on Thursday demanding a roll back of the 5% GST on food items.
Several retailers also fear the new rule will make them uncompetitive. “Since the new rule is applicable for wholesale also, all retailers will have to pay 5% GST. While the organised supermarkets will be able to reclaim tax credit, the kirana stores, who are not tech savvy and don’t issue bills, will end up passing on the 5% GST to the customers, making our shops uncompetitive in the market. We will be wiped out in a few years. The move will further lead to consolidation of the corporate hold over the food sector,” Rajashekhar, who runs a kirana store in Vidyaranyapura said.