The last few days have been a constant yay-nay debate about the Goods & Service Tax (GST) Bill. And after much discussion, the bill bagged a big ‘yes’ from the Rajya Sabha and will finally be put into action. The move is being termed as the biggest tax reform since Independence!
But all we really know about the GST bill is that it’s good. But how? And how is it going to affect our daily lives and more importantly, food? Here’s all you need to know.
What Is The GST?
The GST will replace a number of different taxes levied and state and local level, and put in its place a unified value added tax system. This will eventually lead to the country functioning as one big common market sans added taxes at different levels.
“The biggest pro of GST is that we will have a single tax without the cascading effect of multiple taxes, so only value addition is taxed at each point, that is a healthy international practice,” said Piruz Khambatta, chairman at Rasna, and chairman at CII National Committee on Food Processing.
This will eventually lead to retail prices dropping, which is obviously a good thing for the consumer. The industries benefiting form the GST reform are the retail, logistics, FMCG, automobile, multiplex and cement industry. While the telecom and consumer staples (personal care items, dairy, edible oil, etc.) are at a said loss.
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How Does It Affect The Food Industry?
The effect of GST on the food industry is on multi levels. For starters, agricultural produce will become more mobile as trucks carrying perishable commodities will be able to move around without much difficulty.
Currently, local produce rarely crosses state borders because of the Central Sales Tax (CST), but once the GST is in place, food from one part of the country can travel places without added taxes.
“These multiple taxes are nothing but a route to cheat people,” said Vijay Setia, leading basmati rice producer and past president of All India Rice Exporters Association. “GST is a welcome move as there will be more transparency in the system. There will be a common market in the absence of CST and entry tax.”
Image: The Hindu
While the GST looks like a bed of roses, it comes with its fair share of ifs and buts. Most of them because the rate at which the GST will be levied has still not be cleared.
Pritam Shah, MD at Parag Milk Food, said GST is not beneficial for agricultural commodities and allied sector but might benefit the engineering sector. “Currently, there is no tax to procure milk from farmers,” he said. “We only pay 2% central VAT on sale of milk powder to a company. When GST gets implemented, the tax can be 12.5% or 15% or 18%. There will be a straight cost hike in milk and milk products prices.”
Another example where the GST is not exactly of help is the tea industry. With almost 1000 million kg of tea consumed annually, the industry could also face negative effects of the bill. According to a senior executive, “Tea being a garden produce and coming within the purview of the definition of agriculture as envisaged in the Draft Model GST Law should be exempted from GST.
“In case full exemption of GST is not possible, GST rate on tea should be kept on a par with the current tax rate of 5-6%. The present concessional tax rate of 0.5/1% for teas sold through auctions should be allowed to continue under the GST regime. Otherwise, tea will become costlier.”
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