The biscuit manufacturers have threatened that they would be constrained to raise the prices of their products by 10% within a month if the value added tax (VAT) is not reduced from the existing 12.5% to the level of 4% as existing for products like bread, bhujia, namkeen, jam, jellies and fruit juice.
They have appealed to the chairman of the empowered committee on VAT, Asim Dasgupta, chief ministers and finance ministers of all states. The empowered committee on VAT is slated to meet on April 7, 2008.
The president of the Indian Biscuit Manufacturers’ Association (IBMA), BP Agarwal addressing the mediapersons on Friday said: “the biscuit industry, particularly those in the small and medium sector, is burdened with the steep increase in prices of raw materials like wheat flour and vegetable oil. Biscuit is a price sensitive high volume low margin industry. Increase in production of biscuit is estimated to around 20%, if VAT is reduced to 4%.” He informed that Gujarat and Kerala have recently imposed 10% surcharge on VAT and many states were charging local levies like entry tax, purchase tax and local development tax. West Bengal and Tamil Nadu have resorted to differentiating biscuits made by registered and unregistered units under Factories Act and also between branded and unbranded biscuits. Such measures are unjustified; he said and urged the state government to make biscuits available to the poor at cheaper prices by lowering taxes and levies. About 40% of the biscuit industry is in the unorganized sector.
Biscuit industry witnessed a growth of 17% in 2007-08 after stagnating around 13-14% growth rate in the last 4 years. It picked up momentum in the first half of 2007-08 on account of exemption from central excise duty on biscuits with MRP up to Rs 100 per kg. In the first six months of 2007-08 biscuit production was 944,000 tonne. In 2006-07 production was 1.614 million tonne. About 15% of the production is exported, according to IBMA data.