Price of glucose biscuits to rise after GST

An 18% rate has been slapped on biscuits below Rs 100 per kg, higher than the current 9-10 per cent

Glucose biscuit makers such as Parle Products, owners of the iconic Parle-G brand, are likely to raise prices in July as biscuits below Rs 100 per kg have been slapped with 18 per cent goods and services tax (GST).

The effective tax rate paid by players in this category is 9-10 per cent at present.

In a meeting on Saturday, the GST Council decided on doing away with the variable tax structure that prevailed on biscuits, bringing biscuits below and above Rs 100 per kg at par. 

So biscuits above Rs 100 per kg, much like those below Rs 100 per kg, will have 18 per cent GST. 

Premium biscuits or those above Rs 100 per kg have an effective tax rate of 16-17 per currently. So while companies such as Britannia and ITC that focus on the premium end of the biscuit market are happy, those focusing at the lower end are unhappy, according to sources in the biscuit sector.

Price hikes in the glucose category are expected to be in the region of 2-3 per cent to begin with, given that this segment, which constitutes 23 per cent of the Rs 26,000-crore domestic biscuit market, is price-sensitive.

“We are disappointed with the GST rate announced today (Saturday). 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," Mayank Shah, category head, Parle Products, said.

Britannia and ITC Foods could not be immediately reached for their comments.

Shah said the Biscuit Manufacturers Association, an apex body of biscuit makers in India, was expected to make a representation to the government next week, given that there were 700 units in the country that made glucose and other low-priced biscuits.

While Parle Products derives a third of its revenues from the glucose category, the percentage is small for players such as Britannia. The latter, along with ITC Foods, has been focusing its attention instead on cream biscuits and cookies, which are higher-priced and considered premium in nature.