The food and beverage industry has called rates for processed food and beverages fixed by the Goods and Service Tax (GST) Council detrimental to the growth of the industry and sought a review of the rates.

Industry insiders stated that most of the proposed rates were in contradiction of the rates recommended by the ministry of food processing industries (MoFPI).

They added that it was a bad treatment of the food processing industry and the ministry, whose recommendations have been ignored. They also warned that it will lead to inflation.

The Confederation of All India Traders (CAIT) stated, “A cursory look at the classification of goods under different tax slabs of GST reveals that certain items placed under the 28 per cent tax rate category needs to be re-classified under the appropriate tax slab from the point of view of micro-, small and medium enterprises (MSME) and consumers.”

“Pickles, sauces, instant mixes and some of the other items pertaining to food processing have been placed under the 18 per cent tax slab, though these are consumed by a large number of people across the country. Therefore, these and other similar items deserve to be placed in a lower tax bracket to maintain prices,” it added.

Dinesh Shahra, founder and managing director, Ruchi Soya Industries Ltd, said, “The fitment of five per cent GST on edible oils, as approved in the 14th GST Council meeting, is more or less on expected lines.”

“However, the fitment of a GST rate of 12 per cent on soya bari and five per cent on soya flour comes as a disappointment. Soya bari and soya flour are rich in proteins, and can be a major weapon in India’s battle against protein malnutrition. Soy protein is the least expensive and nutritionally the most valuable and economical protein compared to that obtained from any other vegetarian or non-vegetarian source,” he added.

“We hope that the government will relook at the GST rates on texturised vegetable proteins, commonly known as soya bari and soya flour, and exempt them to promote the use of soy protein to prevent and treat protein malnutrition in the country,”

The Indian Beverage Association (IBA), meanwhile, stated that it was extremely disappointed in the fact that sweetened aerated water and flavoured water were placed in the highest tax slab rate of 28 per cent, combined with an additional cess of 12 per cent.

The effective tax rate of 40 per cent on these products under the GST regime is against the stated policy of maintaining parity with the existing weighted average tax, which is significantly below 40%.

This increase will have a negative ripple effect and hurt the entire ecosystem of farmers, retailers, distributors and bottlers in India.

“The rationale for the GST regime is to bring about a taxation system that propels the India’s growth story forward and making products more affordable for consumers and benefit society at large,” the association stated.

“This increase in tax will further limit the growth of the beverage industry. Moreover, the imposition of cess on non-aerated flavoured water and nutrition drinks is not in line with the stated intentions of levying cess only on aerated drinks,” it added.

“IBA hopes for reconsideration of the rate of cess on aerated drinks, besides having a lower rate for non-sugar sweetened drinks, nutrition beverages and aerated beverages that contain fruit juice, and expects a positive outcome from the government,” the association stated.

Vaibhav Kulkarni, regulatory committee chairman and board member, Health Foods and Dietary Supplements Association (HADSA), said, “The industry is still evaluating the list suggested by the council, which categories products in the zero, 5,12, 18, and 28 per cent GST categories.”

“Looking at nutraceuticals, there is still a bit of confusion, and it needs detailed deliberation and discussion to look into which category it fits,” he added.

“It is time now to have a separate head for nutraceuticals with a clear rate of tax mentioned for it. Also, the list which is given out by the Council needs to differentiate the categories, as health-based food items cannot be clubbed with the luxury products,” he added.