High VAT deters growth of Punjab food processing units

The food processing units scattered across Punjab are languishing due to high tax structure framed by the state government.

The units engaged in manufacturing of bakery products, branded rice processing and wheat processing are in a tight squeeze due to a value added tax (VAT) of 13.5 per cent. The state government had imposed a 10 per cent surcharge on VAT in the recent past and the industry has been sending its delegations to the state government to withdraw this in the coming budget.

According to All-India Bread Manufacturers Association President Ramesh Mago, “The food processing industry in Punjab could have proliferated due to availability of plenty of grains and green vegetables but the adverse tax structure has undermined the growth of this industry”. He added, there is no VAT on this industry in Uttar Pradesh and Himachal Pradesh so they cannot export their products into other states. At the same times, the manufacturers in the neighbouring states have the advantage of selling the same in Punjab due to the lower cost.

He apprised, many small manufacturers have cut down their production due to non-viable business proposition.

According to CII Punjab State Council President and Mrs Bectors Foods Specialities Limited Deputy Managing Director Akshay Bector, the estimated size of the food processing industry in Punjab is in a range between Rs 800 crore and Rs 1,000 crore. Except for half-a-dozen big players, mostly there are small and medium units.

The small units are struggling with the high cost of commodities due to inflation of food items, escalation in the wage rates due to labour shortage and high cost of captive power. Mago added, they want the government to impose VAT on products priced above Rs 100 per kilograms as items like biscuits and rusks are consumed by below the poverty level consumers.

He said, the sweets are exempted from tax and dry fruits are charged four per cent VAT. So, it is not conducive for the state to charge cheaper goods with higher VAT in the state and allow the neighbouring states to earn profit.