CENTRAL EXCISE DUTY
ON BISCUITS
While it is a matter of great satisfaction
that the Government of India after 3 years, acceded to our persistent
demand and granted reduction in Excise Duty (from 16% to 8%) in
the Union Budget for 2003-04, taxation, both at the Central ,
State and local levels continue as major deterrent impeding the
capacity utilization, which presently range between 50% to 60%.
On the other hand, per capita consumption of Biscuit ( 2.25 Kg.),
is very low in India, as compared to 4.25 kg in South East Asian
country, 7.5 kg in Japan and 10 kg in USA, UK and Europe.
The Federation of Biscuit Manufacturers
of India, in its Pre-Budget Memorandum for 2004-05 has urged the
Union Finance Minister to exempt biscuit from Central Excise Duty,
at par with the other food products such as juices, jams, wafers,
sauces, namkeens, bhujias, mixtures, dairy products, packed tea,
regular coffee, etc. The text of the FBMI Pre-Budget Memorandum
is given in ANNEXURE-I.
SALES TAX / VALUE ADDED
TAX ON BISCUIT
While the Central and State Governments
have identified Food Processing Industries, including biscuits,
sun shine industries that need to be encouraged for growth and
development in the coming years, however, regressive measures
viz- high dozes of taxes on food processing industries, has adversely
affected industries like biscuit and eroded their profitability
and viability. In the case of biscuit Sales Tax is levied between
8% and 16% by various State Governments. Besides, biscuit is also
subjected to other local levies i.e. Turnover Tax, Entry Tax,
Octroi, etc. Biscuit manufacturers have also to pay Central Excise
Duty, Sales Tax, etc. on raw materials / inputs as also packaging
materials. Another adverse impact of higher rate of Sales Tax
is that this would result in pushing unhygienicaly produced biscuit
made by the unorganized sector into the markets. The present rate
of more than 15% has considerably reduced the turnover of biscuit
manufacturers and result in widespread sickness in the industry,
which already has 40% to 50% idle capacity. While the industry
has generally welcomed the introduction of Value Added Tax (VAT)
replacing Sales Tax in the states, the Federation is perturbed
that biscuit has been included for levy of VAT @ 12.5% i.e. Revenue
Neutral Rate, whereas items of mass consumption similar to biscuit
such as bread, etc. are proposed to be subjected to 4% VAT, classified
as “ items of mass consumption”. Text of the FBMI
representation submitted to the Member-Secretary, Empowered Committee
on Sales Tax / VAT is given in ANNEXURE –II, together with
rates of Sales Tax on biscuit in various States.
The Federation has urged the Empowered
Committee on Value Added Tax (VAT) and the Chief Ministers of
various State Governments to levy VAT on biscuit @ 4%.
TAXATION
A suggestion has been received that
we may urge the Union Finance Minister and Chairman,CBEC, to exempt
biscuits from Cenvat (which was reduced from 16 to 8% in the 2003-04
Budget), on the ground that while on the one hand excise duty,
sales tax etc on important inputs like Veg.Oil ets are going up,
biscuit is also subjected high rates of Sales tax(proposed to
be replaced with 12.5% VAT), on the other hand, similar food products
such as Bread, Jam, Sauces , namkeens etc are not only exempted
from Excise duty, but also from sales tax etc.
