GST (il)logic: Tax on biscuit 18 per cent, bread 0 per cent, rusk 5 per cent

Chennai: Biscuit makers hope that the GST Council meeting on Friday will reduce the rates on low-priced items.

The Biscuit Manufacturers Welfare Association has made a representation to the council seeking revision of GST rate for biscuits priced below Rs 100 per kg on par with other processed food items which were exempt from excise duty during the previous regime.

According to Mayank Shah, Category Head, Parle Products and Vice President, Biscuit Manufacturers Welfare Association, low-priced biscuits, breads and rusk were exempted from excise duty under the previous tax regime. While biscuits were taxed at 18 per cent, bread was brought under the nil category and rusk was taxed 5 per cent when GST was introduced.

“Most of these biscuits are on fixed price points. In order to pass on the additional tax burden, biscuit makers had shrunk the packets and this saw a shift of the consumer to unorganised processed food. It is a lose-lose situation for everyone. If the customer buys the biscuits and snacks from the unorganised sector, he risks of eating unhygienic food and the exchequer loses tax money,” he said.

Biscuits priced below Rs 100 per kg accounts for 25 per cent of the biscuit market in value terms and 42 per cent in volume terms. Glucose, marie and milk biscuits fall under this category.

“These products are bought largely by the middle and lower income groups for a functional purpose of satiating hunger. The customer group is highly price sensitive. The higher priced biscuits are for indulgence and we have not asked to bring down the rates for these premium biscuits,” he said.

While the biscuit makers have been asking the government to correct the rates since the GST was introduced in 2017, the recent slowdown, especially in the rural markets, has started affecting the companies badly. The lower priced biscuits have witnessed a 7 to 8 per cent decline in sales. Biscuit is one of the products that have led to a slowdown in the FMCG sector.