GST: Biscuit makers sour over tax parity

Putting biscuits below Rs 100 a kg in the 18 per cent goods and services tax (GST) slab might push price-sensitive consumers towards unbranded products, say those operating in the segment.

Typically, glucose biscuits are priced Rs 71 a kg. The segment is the cheapest among key sub-categories such as creams and cookies, which are available at Rs 120-125 a kg. 

The GST Council on Saturday removed the variable tax structure on biscuits, taxing those below and above Rs 100 per kg at the same rate. 

This has raised the chances of a price increase in the glucose category, sector experts said.

A possible two to three per cent price increase in glucose biscuits in July, industry sources said, could push consumers of branded products to unbranded ones. “We are disappointed with the rate,” said Mayank Shah, category head of Parle Products. “This goes against the principle of social justice, where the poor will carry the burden of additional tax and those who are well-off will not.” The effective tax rate at present in the glucose category is 9-10 per cent, while those at the premium end pay 16-17 per cent.

The organised biscuit market in India is pegged at Rs 26,000 crore yearly and the unorganised one at Rs 13,000 crore. A price hike of two-three per cent in a category where the unit price varies between Rs 2 and Rs 10 could increase the size of the unorganised market by at least Rs 500 crore, industry sources said. 

The organised glucose biscuit category, around Rs 5,500 crore, could shrink to about Rs 5,000 crore as a result. 

The rate of growth of glucose biscuits, dominated by Parle-G of Parle Products, is the slowest at around four-five per cent per annum, according to sector experts.

Cream biscuits have an annual rate of growth of eight-nine per cent while cookies are growing at 15-16 per cent per annum.