The food processing industry has demanded a host of tax and Customs exemptions for Budget 2007. A 10-year tax holiday for cold chain infrastructure for undertakings involved in the complete supply chain, Customs duty and countervailing duty exemption for import of food processing machinery by mega food processing plants, uniform VAT across states and abolishing FBT are some of the key demands.
Based on representations from dairy, confectionary, bakery, wine, fruit and vegetables, meat, poultry and marine companies in the food processing sector, Ficci has conducted a study to list out the taxation and regulatory constraints being faced by the industry.
Conducted by Ficci, the study highlights the major issues facing the sector: non-availability of right quantity and quality of raw material, supply chain infrastructure, high cost and non-availability of finance, and lack of cutting-edge technology to increase efficiency of food value chain are among some of the issues.
The recommendations made in the study have been submitted to the finance ministry for consideration in the Budget. Apart from a 10-year tax holiday for cold chain infrastructure under Section 80-IA of the Income-Tax Act for the undertakings involved in the complete supply chain, the industry has also demanded excise duty exemption for food processing machinery and refrigerated trucks used by the industry to reduce capital costs.
The industry has also sought concessions to facilitate R&D activities in the sector. For instance, Customs duty exemption for manufacturing establishments that have R&D facilities and invest in R&D activities and a 150% weighted deduction with respect to in-house R&D expenditure has been sought. However, it has also been suggested that a threshold limit on R&D expenditure may be set for eligibility of fiscal benefits.
Apart from uniform VAT rates across states, abolition of inter-state levies such as octroi, entry tax, mandi tax and entertainment tax has also been sought. Though the country ranks amongst the largest producers of milk, tea, fruit and vegetables in the world, its share in the $6.2-billion global trade in processed foods is a mere 1%. However, estimates suggest that the food processing industry is expected to treble from 6% to 20% with its share in global agro trade expected to rise to 3%.