VAT hits biscuit industry

New Delhi, May 9 (UNI) The country's biscuit makers today said that they have been plagued by a low demand pick-up and heavy losses mainly due to the Value Added Tax (VAT) imposed at the rate of 12.5 per cent.

''The sector has been hit hard, especially the small and medium segment,'' President, India Biscuits Manufacturers Associatioin (IBMA) B P Agarwal said.

The association has submitted representations to the Chief Ministers, Finance Ministers of all state governments, and also to Chairman, Empowered Committee on VAT Asim Dasgupta, urging them to reduce the rate of VAT on biscuits to four per cent.

Biscuit, a nutritious snack food available at very reasonable prices and consumed predominantly by children and economically weaker sections of the society, fiscal policies should be accordingly tailored to ensure greater consumption of these goods among the low-income group, Mr Agarwal added.

He said it would have ripple effects as higher consumption of processed food including biscuits will lead to greater demand for agro products, like wheat, vegetable oil, sugar milk, etc. Thus, growth in production and consumption of biscuits would benefit the farmers of these agro products.

However, sharp increase in the prices of wheat, vegetable oil sugar etc has already hiked up the cost of production coupled with various local levies, such as purchase tax, entry tax, octroi etc.

Recognising the need to encourage biscuit manufacturing, Tamil Nadu, which has recently introduced VAT, has fixed four per cent on biscuits. Similarly Assam is also levying VAT at 4 per cent on biscuits,'' mentioned Mr Agarwal.

He urged other state governments to consider IBMA's representation for fixing 4 per cent VAT on biscuit.

''Biscuit industry directly and indirectly employs more than 25 lakh workers, and therefore, deserves sympathetic consideration by the state governments, especially with regard to levy of VAT,'' justifies Mr Agarwal.

UNI