GST: Prices of some products will rise, but there will be many benefits as well
As GST statute bill is set to face test in RS, agri commodity sector remains in dark whether the APMC/ mandi taxes, interstate taxes will be abolished.
As GST statute bill is set to face test in Rajya Sabha on Wednesday, agri commodity sector remains in dark whether the APMC/ mandi taxes, interstate taxes will be abolished and only GST will be applicable.
"The biggest pros of GST is that we will have a single tax without the cascading effect of multiple taxes, so only value addition is taxed at each point that is a healthy international practice," says Piruz Khambatta, Chairman and Managing Director, Rasna, and Chairman of CII National Committee on Food Processing.
However, he feels, "unless the overall GST is low for food processing sector, it will lead to an increase in inflation and will not benefit farmers or consumers." Khambatta feels that no company will take the hike and pass it on to consumer. "I hope that GST does not put breaks on the growth momentum recently regained or burn a big hole in consumers already pin holed pocket and make processed food beverage a fundamental necessity out of a common man’s reach."
Meanwhile, Saloni Roy, senior director, Deloitte feels that exemption or concession treatment for agriculture commodities which are sensitive to price hike will continue. She however feels that, with food products are eligible for concessional duties today and if GST rate touched 12 per cent to 18 per cent we might see an increase in prices.
Talking to ET, Angshu Mallick, chief operating officer of Adani Wilmar says, "We are happy that GST is coming. But we are still unclear whether the existing taxes like mandi tax will be merged with GST and there will be a uniform tax. For instance, in Uttar Pradesh there is 2.5 per cent mandi tax and a VAT of 4 per cent. These however, vary from state to state. So we would like to know whether mandi tax will be there or not apart from GST."
Ideally GST for the centre and state is expected to consist of an amalgamation of a number of central and state taxes which will enable them to give one tax rather than giving multiple taxes
"These multiple taxes are nothing but a route to cheat people. GST is a welcome move as there will be more transparency in the system. There will be a common market in the absence of CST and entry tax," says Vijay Setia, a leading basmati rice producer and past president of All India Rice Exporters Association. India produces 110 million tonnes of rice annually.
Pravesh Sharma, co-founder and CEO of a start-up- the Sabziwala, which source fresh vegetables and fruits directly from farmers to supply urban customers feels that GST will bring a lot of transaction especially trading in oilseeds, pulses and cereals which are happening outside the tax net. "It will bring benefit to processor and consumers as cascading impact of prices will be checked," he says.
At present, goods are being sold mostly within the state in order to avoid paying the CST which is not credited at the stage of manufacture or in course of trading. Good quality products being manufactured in one part of the country will find more market in the farthest part of the country because there will be no CST and no entry tax.
However, there is confusion over whether there will be a flat rate of GST for both imported and domestic oil. Mallick says, "Imported oil attracts a duty of 12.5 per cent. It is being said that GST will be at the rate of 5 per cent. If it is so, then it is not clear whether imported edible oil will be taxed at 17.5 per cent and domestic oil at 5 per cent." India imports around 14.5 million tonnes of edible oil annually.
Pritam Shah, MD at Parag Milk Food that sells ‘Go Cheese’ cheese brand says that the GST is not beneficial for agri commodities and allied sector but might benefit the engineering sector.
"Currently there is no tax to procure milk from farmers. We only pay 2 per cent central VAT on sale of milk powder to a company. When GST get implemented the tax can be 12.5 per cent or 15 per cent or 18 per cent. There will be a straight cost hike in milk and milk products prices," he says adding that with state tax from octroi to mandi tax to remain, there was unlikely to be a huge difference. Annual milk production was 160.35 million tonnes during 2015-16 as compared to 146.31 in 2014-15 and 137.69 million tonnes during 2013-14.
Tea, the second most popular drink after water, needs to be exempted from GST feels the industry. "Tea being a garden produce and coming within the purview of the definition of agriculture as envisaged in the Draft Model GST Law should be exempted from GST. In case full exemption of GST is not possible, GST rate on Tea should be kept on par with the current tax rate of 5 per cent-6 per cent. The present concessional tax rate of 0.5 / 1 per cent for teas sold through auctions be allowed to continue under the GST regime. Otherwise tea will become costlier," says a senior tea industry official. India consumes nearly 950-1000 million kg of tea annually.