GST Council not likely to reduce levy on biscuits
Representative imageNEW DELHI: The GST Council may stay clear of reducing goods and services tax (GST) on biscuits, whose case is being aggressively pushed by companies led by Parle, as it may open the doors to same demand from sectors that face a similar levy.
Government’s calculations show that a reduction in GST from 18% to 12% will result in an annual revenue loss of around Rs 2,000 crore, but may not result in any gains for consumers. If the duty is lowered, the price of a packet of glucose biscuit, that costs Rs 5 at the moment will have to be reduced by 25 paise, which may be tough. So, biscuit manufacturers will have to add one more biscuit to increase the weight. A similar exercise will have to be undertaken for packets that cost Rs 2.
“In a few months, companies will raise price, arguing cost pressure and pocket the gain. It is not going to benefit consumers in any way,” said an officer. Biscuit manufacturers have demanded a tworate structure with 5% levy on biscuits that cost up to Rs 100 a kg. Overall levy was reduced from 21-23% to 18% when GST was launched two years ago.
In any case, the benefit of a lower levy on the popular biscuits will flow mainly to four players — Parle, Britannia, Anmol and Raja. Parle is estimated to account for over 50% market share in the segment, officials said.
Contrary to the claims made by entities like Parle, there has been a healthy growth in business after implementation of GST. Parle had reported a 21% rise in profit during FY18, while revenues were 7% higher.
The government fears that several other products, such as sugar confectionery, breakfast cereals, instant food items, chocolate produce, ice cream, coffee, toffee, sharbat, soap, shampoo, detergents, shoe polish, and bulbs, which fall in the 18% slab, may also seek a duty cut. “These are also daily-use items which can make an equally convincing claim,” said an official, pointing out that the current revenue situation did not allow the Centre and the states to reduce rates.
Government’s calculations show that a reduction in GST from 18% to 12% will result in an annual revenue loss of around Rs 2,000 crore, but may not result in any gains for consumers. If the duty is lowered, the price of a packet of glucose biscuit, that costs Rs 5 at the moment will have to be reduced by 25 paise, which may be tough. So, biscuit manufacturers will have to add one more biscuit to increase the weight. A similar exercise will have to be undertaken for packets that cost Rs 2.
“In a few months, companies will raise price, arguing cost pressure and pocket the gain. It is not going to benefit consumers in any way,” said an officer. Biscuit manufacturers have demanded a tworate structure with 5% levy on biscuits that cost up to Rs 100 a kg. Overall levy was reduced from 21-23% to 18% when GST was launched two years ago.
In any case, the benefit of a lower levy on the popular biscuits will flow mainly to four players — Parle, Britannia, Anmol and Raja. Parle is estimated to account for over 50% market share in the segment, officials said.
Contrary to the claims made by entities like Parle, there has been a healthy growth in business after implementation of GST. Parle had reported a 21% rise in profit during FY18, while revenues were 7% higher.
The government fears that several other products, such as sugar confectionery, breakfast cereals, instant food items, chocolate produce, ice cream, coffee, toffee, sharbat, soap, shampoo, detergents, shoe polish, and bulbs, which fall in the 18% slab, may also seek a duty cut. “These are also daily-use items which can make an equally convincing claim,” said an official, pointing out that the current revenue situation did not allow the Centre and the states to reduce rates.
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