Bakery industry bears the brunt of 12.5% VAT

With implementation of 12.5 per cent VAT on bakery items, more than 1,500 bakeries have downed their shutters rendering over 10,000 labour jobless.

Over 8,000 bakeries are spread all over the state and till recently this unorganised sector never paid any tax on baked items.

They never maintained books or never paid tax as these items were tax exempted, said Mehmud Hussain, secretary of Federation of Gujarat Bakery Industry.

He also added that the industry is seeking for exemption or will have to turn to some other alternative.

"There are several daily wagers in this cottage industry who are now unemployed," said Hussain. He further said the industry has urged state government either to exempt VAT or reduce it to four per cent on baked items.

On the other hand, the organised sector too is not ready to pass on the VAT on customer. "Earlier we use to absorb the 12.5 per cent sales tax but now we have stopped selling baked items like pastries and cakes with VAT added to it," said Madhusudhan Dhanani, owner of Choice Snacks Bar.

"Not only on baked items but 12.5 per cent tax is levied on other food items which is very high. All customers are complaining about it," said Dhanani.

Choco Den, which supplies baked products to restaurants and hotels have reduced 30 per cent of its production. "As our supply has gone down, we reduced our production by about 30 per cent. Several restaurants and fast-food centres have either reduced the supply or have stopped purchasing baked products," said Bhavin Khemasiya, owner of Choco Den.

"The 12.5 per cent VAT on restaurants and on bakery industry is too high for which we have requested state government to revive," said T K Tekwani, president of of Hotel and Restaurant Association, Gujarat.

He said as the marriage season is round the corner, the banqueting industry will be facing tough time to juggle with VAT and service tax.

"The total tax levied is 19.74 per cent including 12.5 per cent of VAT and 7.24 per cent of service tax which is exorbitant. We need to drop VAT to at least four per cent," said Tekwani.