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High GST Rates: A Serious Threat to Agro-Food Processing Industry – Rajheev Aggarwal
Press Release
Saturday, June 03, 2017 | 04:03 PM
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Rajheev Agrawal, CEO of Nilon’s Enterprises Pvt. Ltd., PuneMumbai : High rates of GST on several processed agro-food items will be a serious detriment for the growth of the industry, worries most of the operators. Citing the case of pickles, Rajheev Aggarwal, CEO of the Rs. 300+crore Nilon’s Enterprises Pvt. Ltd explained, 26 of the 29 states of the country tax pickles at the rate of 5%. Karnataka imposes none, while Rajasthan and Kerala impose VAT on pickles at a higher rate. Add 2% Excise to it and 0.2% Octroi on a weighted average basis. That totals to 7.2% tax on pickles at present, which the GST Council intends to raise to a whopping 18%.
 
Pickle is a staple food for a very large part of the people of the country. When the prices of vegetables shoot through the roof, many impoverished are compelled to satiate their hunger just with chapati and pickles. The market, says Aggarwal, is so fiercely competitive and price sensitive that the industry operates with a paltry 2% margin. If the proposed GST rate was implemented, the industry, unable to bear the burden, will be compelled to increase the prices of pickle in the range of 10-14%. 
 
Pickle is just an example. The proposed GST Tariff has put an agonising load on most of the processed agro-food products. The table below clarifies the terrible burden the GST regime is ushering in for a part of the food processing industry:

Item

Existing Tax

Proposed GST

Chutney (Tamarind/Schezwan)

7%

28%

Tomato and other sauces

7% 

18%

Pickles

7% 

18%

Mix Fruit/Pineapple Jam

5%

18%

Macaroni

7% 

18%

 Pasta

7%

18%

Vinegar

5%

18%

Rusk

0%

5%

Sabudana

0%

5%


Rajheev Aggarwal points out that food processing are an agro-based industry which makes its purchases in cash and directly from the farmers. If agro-food processing industry was pushed to the corner, it would adversely impact the farmers. He appeals to the GST Council to review its decision at the next meeting and provide the food processing industry a decent means of survival.
 
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