Biscuit makers demand cut in VAT

Biscuit manufacturers want the UP government to slash value-added tax (VAT) on biscuits to 4 per cent, which is levied at 12.5 per cent.

The Indian Biscuits Manufacturers Association (IBMA), in a memorandum submitted to the state government, has urged UP Chief Minister Mayawati to reduce VAT on biscuits from 12.5 per cent to 4 per cent, as the higher rate of tax could ruin the industry.

The members of the association also met the senior officials of the UP government to impress upon them to reduce the rate of VAT implemented in the state from January 1.

Though the association has demanded from the UP government to reduce VAT, on the same product the neighbouring states of Delhi, Haryana, Bihar, Jharkhand, Rajasthan and Uttarakhand have the same rate of 12.5 per cent.

Agarwal, chairman and managing director of the Surya Foods and Agro Limited "" manufacturers of Priyagold biscuits "" argued when food products like jams, jellies, potato chips and ice cream, which do not have any nutritional value are either exempted or taxed VAT at the rate of 4 per cent. per cent, why should biscuit be taxed at the rate of 12.5 per cent.

"Even luxury item like dry fruits are being charged 4 per cent under VAT but common man's healthy nutritious food like biscuit is being taxed heavily", he said.

Claiming if the rate of VAT on biscuit were reduced to 4 per cent the production would grow 25 per cent annually, which would generate more revenue for the state exchequer. Commenting on the similar 12.5 per cent tax on biscuits in other states, the association president said they are talking with other state governments over the issue.

At present, about 60 biscuit manufacturing units of UP, with an annual turnover of Rs 200 crore, have been affected by the recent hike under VAT which was 8 per cent earlier under trade tax regime.

Agarwal said that the state government had already scrapped compounding tax system for the small entrepreneurs, which has further aggravated the problems for the biscuit manufacturers.