ALL INDIA FOOD PROCESSORS’ ASSOCIATION
Ref. No. 65/II/2011/10109
Dated: 19.10.2011
Dr. U. Venkateswarlu, IAS
Joint Secretary
Ministry of Food Processing Industries
Panchsheel Bhawan, August Kranti Marg,
New Delhi-110 049
Subject: Recommendations on Pre-Budget Memorandum (2012-2013)
Dear Sir,
Kindly refer the Ministry of Food Processing letter Ref. No. 6-7/2011-Taxation dated 3rd
August 2011, inviting recommendations on the Budget Proposals for the years 2012-2013. In
this regard, we are submitting the same as under:
A.
INCOME TAX DEDUCTION:
a) 80-IA Income Tax Deduction: 80-IA Income Tax Deduction on the profit deriving from
the business of processing, preservation and packaging of fruits and vegetables is only
available to new units and not to existing unit. It is suggested to make it same for the
existing units also and definition of food processing needs to be widen to include all
processed foods such as Ready to Cook Mixes, Ready to Eat Foods, Soft-drink
concentrate, all fruits and vegetable products and other miscellaneous products.
b) To extend Tax Holiday: Under 80-IA processed food industry has 5 years tax holiday.
This should be extended to existing units also subject to 50% capacity enhancement. This
will encourage fresh investments.
c) Extended Income Tax benefits to those Food Processing Units generating more
employment: As Food processing industry can generate more employment, therefore
suitable Schemes need to be prepared whereby benefits such income tax benefits may be
given to units which are increasing employment year by year.
d) Fresh Capital injection in Machinery: Fresh Capital injection in machinery and
equipment used for food processing and packaging should be given, including accelerated
depreciation to support newer technologies for increasing production and better quality.
e) Dairy industry should be given same benefits and 80IA.
B.
EXEMPTION ON INDIRECT TAX:
a) Exemption of ‘Excise Duty’ on ‘Indigenous Food Processing Machineries’
and ‘Custom duty’ on ‘Imported Food Processing Machineries’:
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i. Excise duty should be exempted for all the Food Processing Machinery made in India
because the locally available equipment, plant and machinery are not cheap due to high
Central Excise Tax. Therefore, food machineries are generally imported at very high cost.
ii. Presently if a Food processing Machinery is imported the total Import Duty comes to 2130%. The total Import duty may be exempted. Similarly Excise duty also may be
exempted for all the Food Processing Machinery made in India.
b) Exemption of Excise Duty on All Processed Food products:
i. Excise Duty on Fruit and Vegetable products should also be fully exempted from levy of
Excise Duty. The move to increase Excise Duty will subvert the development of the Fruit
and Vegetable processing industry by reversing the build up in the momentum. Since the
industry has a strong backward linkage with agriculture, it will also impact agriculture
negatively.
ii. Bringing back complete exemption to fruit and vegetable products like done in past i.e.
all finished Products, which are made by processing fruits, vegetables, dairy, cocoa,
mixed condiments, seasoning and miscellaneous edible preparations should be exempted.
Therefore all processed fruit and vegetable products to be treated at par with fresh
produce. Also in the last budget, excise of 1% without CENVAT and 5% with CENVAT
was announced, which is counter-productive to the growth of processed fruits &
vegetable products. This is required to be reverted back to nil as earlier.
iii. We suggest for nil rates and if for any reason nil rate is not possible present rate of 1%
without CENVAT and 5% with CENVAT should be continued.
iv. Excise duty on all the Packaging materials used for processed foods should be exempted.
c) Exemption of Excise Duty on Soya Products:
The Govt. of India is charging Excise Duty @10.3% on Soya products manufactured from
Soybean. For the development and promotion of the Soya Food Products such as Soya
Lecithin Liquid, Lecithin Powder, Phosphatidyl Choline and Soya Proteins Concentrate
which have followings unique features:
• Decrease the level of cholesterol and lipids thereby exerting a positive influence in case
of arteriosclerosis and Lipo metabolic disorders
• Improves memory function
• Promotes ability to concentrate
• Promote ability to concentrate
• Protects against fatty degeneration of the liver
• An Essential nutrient
Above Soya products be fully exempted from levy of Excise Duty because Food Processors
have not been able to utilize the potential of Soya food products to improve the health of our
countrymen because of non -priority in Central Government schemes.
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d) Reduction of Excise Duty on the Packaged Drinking Water:
i. The manufacturers of Packaged Drinking Water make available clean and potable water
to the consumers thereby ensuring that the basic need of hygiene and hydration of
consumers are both met. The packaged drinking water is a common man’s product
and accordingly should be put in the NIL categories.
ii. Currently this item is levied an excise duty of 10%. However, if the Govt. on revenue
consideration is not able to remove the excise duty completely, it may look at reducing
the excise duty in a calibrated manner & in the first stage Excise Duty may be brought
down to 4% and taken to zero Excise Duty next year.
e) Lower Excise Duty for Lower Price Units: The challenge for the packaged foods
industry is to make its small unit packs affordable at the lowest economic price point in
order to encourage trials and mass consumption. It is suggested that packaged foods
bearing MRP of up to Rs. 10/- should be exempted from excise (Currently Biscuits
cleared in packaged form, with per KG, retail price equivalent not exceeding Rs.100 are
exempt from Excise).
f) Increase in abatement for excise base: The abatement given for excise calculation
for packaged good does not adequately consider the level of post-manufacturing cost
incurred by Food & Beverage companies and high margin down value chain. Typically,
the post-manufacturing expenses (including margins to trade and retail) account for much
more than the current abatement of 30% of the retail price. So the across Food &
beverage chain abatement should be made 40%.
g) Products at 40% parity: Certain products are already under 40%. All products should
be at 40% for parity.
C.
EXEMPTION/REDUCTION ON DIRECT TAX:
1.
Custom Duty
a) Deduction on Machinery, Inputs and Packaging Materials: The Machinery,
Inputs and Packaging Materials used for manufacture of Processed Foods should attract
minimal customs duty because the end products are under less tax rates while tax rates on
inputs are high, which is resulting:
i. definitions of agriculture produce to include processed food products as well.
This will ensure product of food processing industry would get same benefit
as fresh produce.
ii. inclusion of all advances to the Agriculture & Food Processing industry,
across the value chain, under the category of Direct Agri Priority Sector
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Lending (PSL), without any limitation on the size of investment in plant and
machineries.
iii. into inverted duty structure hence it is counter productive.
b) Deduction to promote ‘Made in India’ brand abroad: To promote ‘Made in
India’ brand abroad, deduction should be announced of 200% for overseas publicity of
every units who is involved for the development of ‘Made in India’ brand abroad
through export of processed foods within the stipulated conditions of quality, distribution
infrastructure and track record. This assistance should be for all promotions and other
marketing activities carried out abroad.
2.
Service Tax
a) Exemption for manufacturing Processed Foods: Service Tax for the services
rendered in connection with manufacture of Processed Foods should be exempted or a
mechanism designed for refund of service tax.
b) Exemption for warehousing of Processed Food Products: Agricultural Products
are fully exempted to pay service tax when stored in Warehouse as per Service Tax Act,
1994. We would like to draw your kind attention that Food Industries have to pay 10.3%
Service Tax for warehousing of processed food products while Agricultural Products
when stored in Warehouses are fully exempted to pay service tax. Therefore, to support
Food Processing Industries 0% Tax or fiscal concession is required.
D.
ROLL OUT OF GST:
a) Lack of consensus amongst the States: We recognize that in the area of GST, State
Governments are very important partners. Thus they have to be closely linked to the GST
roll out plan. Indeed there is lack of consensus amongst the States. Many of them have
reservations that post the GST roll out, their revenues might decline. These concerns have
to be addressed.
b) The Empowered Committee of State Finance Ministers: The Government of
India along with The Empowered Committee of State Finance Ministers is working out a
road map to introduce GST. This is a very forward looking initiative & needs to be
carefully progressed so that the proposed GST regime addresses the concerns of the
industry & removes multiple taxations. The overall incidence of taxation should come
down. This will make the industry competitive while enhancing revenue for the
governments both at the centre & states. Industry is a key stake holder in the
introduction of GST and should be a natural partner in the process of consultation
while formulating the plan and roll out of GST. The extent of involvement of
industry currently in the consultation process needs to be scaled up and made more
intense and frequent. We request the Ministry to use its good offices in persuading
The Empowered Committee of State Finance Ministers to provide us with greater
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ALL INDIA FOOD PROCESSORS’ ASSOCIATION
opportunity of interaction with them so that the industry’s views are taken into account in
the GST formulation and roll out plan.
c) To develop a consensus: The earlier plan of single rate for both Central GST and State
GST is reportedly being talked about as three different rates. This defies economic logic
and is indicative of difficulty in moving forward the proposal of Constitutional
amendment in the Indian Parliament. The Finance act will require to be amended to
enable States to levy service tax. For the draft bill to be passed in the Parliament,
the Government will require deft handling in getting the support of the opposition
parties both in Lok Sabha & Rajya Sabha in as much as the amendment will
require the support of 2/3rd Members of Parliament of both Houses. The UPA is
short of this number and hence will depend on the opposition parties for passing the bill.
Additionally this bill if passed will also need the assent of at least 15 legislative
assemblies of the States. Thus developing a consensus is a prerequisite in moving
forward on this progressive measure.
d) Needless to add, we need to push 0% GST for Food Processing Sector: Nil
Goods and Service Tax (GST) on food processing otherwise all food products price
would go up substantially which will lead to unnecessary food inflation. Government’s
support is required on the following:
 Keeping F&V Processing Industry under a special GST rate of 0% in line with
Cenvat structure
 Uniform classification of “All Processed Foods” across Centre and States on
lines of Cenvat structure
 Organizations having operations in various States in the country should be given
the facility of single registration and for making payments at one central
location
 Abolish States Octroi / Cess being charged in some States for entry of goods
E.
RATIONALIZING ‘VAT’ RATES:
The Ministry of Finance, Government of India, took the initiative of facilitating dialogue
amongst States on introduction of VAT. While the Empowered Committee of the State Finance
Ministers steered the discussions and sorted out several issues, the Ministry of Finance,
Government of India used its good offices in bringing about near unanimity in approaches by
various States in introduction of VAT. Introduction of VAT was a path breaking initiative in the
process of rationalization of Taxes. We recognize that levy of VAT falls under the jurisdiction of
the States. However, in the last over one year or so some of the State Governments have tinkered
with the broad understanding on the rate of VAT applicable to goods and in the process certain
anomalies have emerged that need to be corrected. The new Chairman of the Empowered
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Committee of State Finance Ministers is in place and we suggest that the Ministry of Finance
take the initiative in placing this issue before the Committee with a view to resolve them.
Our suggestions on VAT are as under:
a) VAT on Packaged drinking water: VAT on all food products should be taxed at 4%
through out the country. “Packaged drinking water” is a food item and in line with the
above request, it should also be taxed at the rate of 4%.
b) VAT on Fruit Juice & Fruit based Drinks: In order to promote Fruit and Vegetable
Processing Industry, given its backward linkage with the agricultural sector, the industry
received preferential status from the Central Government by way of exemption from
excise duty and automatic clearance for 100% FDI. The Empowered Committee of State
Finance Ministers constituted to oversee implementation of VAT, seeing the cascading
impact of the industry on agriculture, recommended a rate of VAT @4% on processed
Fruits and Vegetables. The VAT rate of 4% is applicable to fruit juice and fruit juice
based drinks. Despite the States coming to an understanding that fruit juice and
fruit juice based drinks will be under 4% VAT rate, some states have increased the
VAT substantially.
c) VAT on Carbonated Soft Drinks: In the run up for the regime of proposed GST,
many State Governments have recently increased rates of VAT applicable to several
items including ‘Aerated Waters’. VAT rate has been hiked on ‘Carbonated Soft
Drinks’ in several states such as Maharashtra, NCT & other states. This defies
economic logic.
d) VAT on Soya Products: “Soya Processed Foods” such as Soya Edible
Flour/Flakes/Grits, Soya Badi/Chunks/Granules/Textured Soya Protein, Soya Lecithin,
Soya Milk, Tofu (Paneer), Soya Nuts/Papad may also be categorized to Zero rate of tax
because the VAT on Soya food products varies from 4% to 12.5% in various categories
and in various states of India. It should not be more than 4% on all Soya Products.
The VAT rates as determined by a process of consultation amongst States should be the basis for
fixation of VAT. The Fiscal prudence that is sought to be altered could lead to other states also
making changes in the VAT rate. So VAT rates should be uniform in all the States.
F.
VENTURE FUND:
a) To facilitate more entrepreneurs: Under the aegis of Ministry there should be venture
capital fund to facilitate more entrepreneurs in food processing and give a boost to
SMEs.
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G.
PROMOTION OF R&D/FOOD LABS IN THE COUNTRY:
a) With more establishments: Establishment of more education centers and quality food
labs in Public Private Partnership (PPP) for imparting technical & managerial skills
particularly in rural areas under MoFPI.
b) With more R&D centers: Demand driven R&D centers in lines with CFTRI to be
developed across the country.
c) With handsome Schemes: Ministry of Food Processing should come out with handsome
schemes to encourage more private sector involvement to establish food labs in small
towns and remote rural areas.
H.
MID DAY MEAL SCHEME:
a) To include Processed Food Products: It is also worth mentioning that in the Mid Day
Meal Scheme of Government, Food Processing industry is not involved. There is an
urgent need to include Processed Food Products such as Milk products, Fruits &
Vegetable products, Cereal products, Soya products (best source of protein) etc. in the
Mid Day Meal Scheme or in other schemes like ICDS, Antyodaya Scheme, and BPL
Schemes, because in the present scheme of things high wastage and pilferage happen
mostly because rice and wheat are sold in the open market and the end benefit is not
going to the kids but in case of processed foods this can be avoided and kids would be
able to get nutritious wholesome food specially designed for them made hygienically.
These are the suggestions we feel to be recommended for consideration.
With kind regards,
Yours sincerely,
Sd/(Dr. S. Jindal)
Chairman-T&FTC (AIFPA)
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ALL INDIA FOOD PROCESSORS’ ASSOCIATION
Ref. No. 65/II/2011/
Dated: 21.10.2011
Dr. U. Venkateswarlu, IAS
Joint Secretary
Ministry of Food Processing Industries
Panchsheel Bhawan, August Kranti Marg,
New Delhi-110 049
Subject: Recommendations on Pre-Budget Memorandum (2012-2013)
Dear Sir,
In continuation of this Association Letter Ref. No. 65/II/2011/10109 dated 19.10.2011 on above
subject, we have some more recommendations to submit. These are as under:-
A.
CENVAT on a Processed Foods should be ‘NIL’
It is absolutely important that the main point of exemption from CENVAT in all the products
which used to have exemption should be consider to benefit of these sectors to inclusive growth,
rural economy and the fact that by increasing tax on these items, price would only increase,
which will add to Food Inflation. In most of the developed countries processed foods are at ‘0’ %
Tax. We should also give good examples to support our claim for ‘0’% Tax, therefore for the
speedy growth of this sector, the tax on all processed foods should be “nil”.
B.
Problems to Metal Packaging Industry
Can making industry which is predominantly concentrated in small & medium sector spread all
over the country. It employs more than 100,000 people.
Metal packaging industry is facing serious problem on accumulation of credit due to inverted
duty structure and supplies to merchant exporter/manufacturer exporter against Notification
43/2001 dt 26/6/2001. The issues affecting this industry are explained below:
1. Supplies to exporters :
a) Various food products like mango pulp, process vegetables, coffee etc. which are
packed in tin containers are exported out of the country by manufacturers, export
house, traders, merchant exporters etc.
b) These cans are supplied by the industry without paying excise duty under Notification
43/2001 dt 26/6/2001 as merchant exporters and their supporting manufacturers don’t
want to pay excise duty and claim refund. The said notification stipulates
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ALL INDIA FOOD PROCESSORS’ ASSOCIATION
“procurement of goods without payment of duty for the purpose of use in the
manufacture or processing of export goods and their exportation out of India”
c) For can making industry, this results into under utilization of CENVAT credit.
d) We suggest that such deemed export should be brought at par with physical export as
in the latter case, the excise duty paid on packaging material is being refunded under
Rule 18 of the Central Excise Rules 2002.
e) The above measure would help the industry to address the issue of accumulation of
credit which is causing huge cash flow problem to them.
2. Incentives to promote green environment:
a) Country is facing serious problem on deteriorating environment and it is seen that
approximately 30% of municipal waste comprises of different kinds of packaging
waste like plastic, metal, glass, paper etc. which are being used by different segments
of the industry. In order to encourage the user industry to use and promote more and
more packaging materials which are environment friendly and recyclable, the
Government should announce schemes to provide incentives either in the shape of
refund of indirect taxes, providing subsidies or Income tax exemption and also
concessional import duties for Capital Goods used to manufacture such packaging
materials.
3. Direct Tax:
a) Since CENVAT credit has to be taken resulting into reduction of cost of purchase, the
industry is virtually paying income tax on such accumulated credit as it is reflected in
the accrued profit of the company although the same does not become part of actual
cash available with the industry.
b) As per new rule, the person responsible for making payment to a non resident or to a
foreign company is required to furnish information electronically prior to remitting
the payment with a certificate from an accountant and after submitting electronically
a signed print out shall also to be submitted prior to remitting the payment . The new
rule seems to cast more hardship as no payment whether liable for deduction of TTDS
or not can be made without submitting the information. Already there is a provision
to file Quarterly statement in Form 27Q for the payment to non resident &
withholding of Tax. Further banks also required a certificate from an accountant for
compliance in relation to withholding of tax. There is already sufficient safe guard in
respect of payment to non resident & with holding of tax therefore we feel that the
provision will further make the matter complicated and put more hardship.
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We therefore, suggest as under:
1. Deemed export should be brought at par with physical export for the purposes of refund
of excise duty in order to address the issue of CENVAT accumulation with the industry.
2. Alternatively, the accumulated CENVAT credit should be allowed to be adjusted against
the purchase of inputs so that excise duty should not be paid again on such inputs
resulting into further accumulation of CENVAT.
3. Appropriate fiscal incentives should be considered to promote packaging which is
environmental friendly, recyclable and sustainable. These incentives can be given in
terms of subsidies, refund of indirect taxes, concessional duty on import of capital
goods/inputs and income tax exemption.
C.
Coin & Currency Shortage
There is persistent and acute coin and currency notes (small denominations) shortage since years.
There are reports in India about thriving “black” market for particularly coins. Refer to DNA
dated 20th Oct 2011, Pg 2.
It is necessary to address this issue as it is serious and is hampering retail business a lot.
We hope that the above points receive your kind attention.
With kind regards,
Yours sincerely,
(Dr. S. Jindal)
Chairman-T&FTC (AIFPA)
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ALL INDIA FOOD PROCESSORS’ ASSOCIATION
Ref. No. 65/II/2011/
Dated: 01.11.2011
Dr. U. Venkateswarlu, IAS
Joint Secretary
Ministry of Food Processing Industries
(Govt. of India)
Panchsheel Bhawan, August Kranti Marg,
New Delhi-110 049
Subject: Request for reduction in Customs Duty on Oat Grain Dehulled (falling under
Chapter 11 of the Customs Tariff under Tariff Item No. 1104 2200)
Dear Sir,
In continuation of this Association Letter Ref. No. 65/II/2011/10109 dated 19.10.2011 and 21.10.2011 on
Pre-Budget Memorandum (2012-2013), we have some more recommendations to submit. These are as
under:1. We are requesting for reduction of Customs Duty on Oat Grain Dehulled (falling under
Chapter Heading 1104 and under tariff Item No. 1104 22 00 raw Material for Oat Milling
Industry).
2. Customs Duty on Oat Grain falling under Chapter 10 and tariff item No. 1004 is already
Zero.
3. Today maximum quantity is imported in form of Rolled or Flaked Oats as finished product
falling under Chapter heading 11 tariif Item No. 1104 12 00. The same is re-packed by
importers and sold in the market. If Customs duty is not reduced on this Tariff item, there will
be no loss to the exchequer.
4. Very negligible quantity is imported as Dehulled Oat Grain which is an Industrial raw
material. This requires cleaning, cutting, steaming, flaking, toasting, cooling etc. to convert
into rolled or flaked oats. Interestingly, duty on Dehulled Oat Grain is higher than Rolled oats
as Rolled Oats importers can claim drawback of Special Additional Duty.
5. Enclosed chart shows that Zero duty on Dehulled Grain (falling under Chapter Heading 1104
and under tariff Item No. 1104 22 00) will result in giving a boost to the Food Processing
Industry in India and increase in employment and at the same time there will be hardly any
loss to the ex-chequer.
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We therefore earnestly request you to take up the matter with the Ministry of Finance and help in getting
the Customs Duty on Dehulled Oats removed totally.
Thanking You,
Yours truly,
(D. V. Malhan)
Executive Secretary
Encl: As above
Note: Customs Tariff of India has clearly put different Oat Products under different Tariff heads as shown
below:a) Oat Grain
b) Rolled and Flaked Oats
c) Dehulled Oat Grain
1004
1104 1200
1104 2200
The purpose of this classification of various Oat Products under different Chapter Headings and Tariff
items is that the Government can have different duty structure on different Oat Products.
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Chapter 10
Tariff Item
Description of goods
Unit
Current Rate of
duty
(1)
(2)
(3)
(4)
1004
1004 00
Proposed rate
of Duty
Definition of Products
Uses of products
Oat Grain
Raw material for Oat Milling
Industry for making Rolled or
Flakes of Oats
Arguments supporting reduction
of Customs Duty on Hulled oats
Loss to Exchequer due to
reduction of Customs Duty
Oats
- Oats :
1004 00 10
-- Of seed quality
kg.
Free
1004 00 90
--- Other
kg.
Free
ALREADY ZERO CUSTOMS DUTY
Chapter 11
1104
Cereal grains otherwise worked (for example, hulled,
rolled, flaked, pearled, sliced, or kibbled), except rice of
heading 1006; germ of cereals, whole, rolled, flaked or
ground.
Rolled or flaked grains :
1104 12 00
1104 19 00
1104 22 00
-- Of oats
kg.
30%
-- Of other cereals
kg.
30%
kg.
30%
Other worked grains (for example, hulled, pearled, sliced
or kibbled)
Imported in bulk packing and reThis is Finished product
packed in small consumer packs
Ready to cook or eat
for sale -- No processing is done
0%
OAT GRAIN Dehulled
-- of Oats
Raw material for Oat Milling
Industry for making Rolled or
Flakes of Oats
Maximum Quantity is imported under this Tariff Item for
re-packing and if duty is not reduced, there will be no
loss to the exchequer
1. Raw Material for the Industry
2. Low Bulk Density than Oat Grain
therefore easier to Transport.
3. Employment Generation
4. Easy to store
Bringing this Tariff item under
Zero Customs duty will hardly
impact the revenue of
exchequer, whereas it will
promote industrialisation and
employment generation.
Note : Customs Tariff of India has clearly put different Oat Products under different Tariff heads as shown below
a) Oat Grain
1004
b) Rolled and Flaked Oats
1104 1200
c) Dehulled Oat Grain
1104 2200
The purpose of this classification of various Oat Products under different Chapter Headings and Tariff items is that the Government can have different duty structure on different Oat Products.
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