Hit by soaring input costs, the biscuit industry today urged the government to immediately reduce the Value Added Tax (VAT) to an uniform 4 per cent across the country.
"In the last one year, the prices of essential commodities have increased many times. The industry is getting affected as we have not resorted to price increase so far. As a first measure, the government should immediately implement uniform four per cent VAT for biscuits in the country," Indian Biscuits Manufacturers' Association President B P Agarwal told reporters here.
At present, only Assam charges VAT at four per cent rate, he said, adding that biscuit manufacturers are agitated over the continuance of 12.5 per cent VAT by other states, while other similar products like bread, bhujia, namkeen, jam and juices are either exempted or levied 4 per cent VAT.
"The industry is burdened with steep increase in raw materials like wheat, flour, vegetable oil, milk as well as packaging paper and other ingredients," he said, adding, We have already reduced the sizes of packets by about 10 per cent during past one year, but we cannot go beyond that."
The average profit margin of the biscuit firms were about 5 per cent six months ago. But due to rise in the input costs, it has been decreased to one per cent now, said Agarwal.
The demand from IBMA comes at a time when the Wholesale price index-based inflation rates rose to a 3-year high at 7 per cent for the week ended March 22, on higher prices of food, vegetables, minerals and manufactured items.
The association believes that reduction of VAT to 4 per cent would result in 20 per cent growth in the biscuit industry, which would lead to a very negligible loss of revenue to the states