Revenue dept moots 8% excise on processed food items
October, 10th 2006
Department wants 16% excise on soft drinks, chocolates retained.
The revenue department has suggested a uniform excise duty of 8 per cent for all processed food items except soft drinks, chocolates and malted food, for which it wants the rate retained at 16 per cent.
The duty cuts have been mooted as part of an action plan to promote agri-business. The Vijay Kelkar task force on indirect taxes had recommended a uniform excise duty of 6 per cent on all processed food products.
The GoM for promotion of agri-business feels high taxation on processed agricultural products is acting as a disincentive for private sector investment and distorting the competitiveness of food products.
While primary agricultural commodities are mostly exempted, processed commodities are subjected to a central sales tax of 4 per cent and value added tax of 12.5 per cent. Apart from VAT, these products are subject to other taxes like entry tax and octroi. In addition, central excise is levied on all branded products.
There are various anomalies in these schemes of things too. For instance, while jalzeera is exempt from excise, it is levied at a rate of 16 per cent on nimbu-pani. Similarly, sugar confectionery (with cocoa) attracts 16 per cent excise, while excise on the same products without cocoa is 8 per cent.
Ice cream does not attract excise, while ice cream mixes and gulab jamun mixes are levied excise at 16 per cent and 8 per cent, respectively.
On the proposal to cut customs duty on food processing machinery to 5-10 per cent from the present 20-40 per cent, the department has said it is difficult to do so as it will hurt the interests of the domestic capital goods industry.
However, it is willing to cut customs duty on specific machines that are not manufactured domestically. The department has rejected the proposal to drop customs duty to 5-10 per cent from the present 25-44 per cent on packaging material as these are general use items in various industries.