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Biscuit and brick industries seek GST relief before July roll out

LiveMint logoLiveMint 29-05-2017 Gireesh Chandra Prasad

New Delhi: With just over a month left for the rollout of goods and service tax (GST) from 1 July, a few industries are seeking concessions on the rate of tax citing the mass use nature of their products as well as the lower rates assigned to competing products. 

Biscuit manufacturers, for example, have sought exemption from GST for biscuits that cost less than Rs100 per kilogram, which they say are more widely consumed than bread that attracts no GST. 

Producers of bricks from fly-ash, a by-product of coal-based thermal power stations, are seeking parity in taxation with red clay bricks, which are proposed to be levied 5% GST. As per the tax schedule approved by the powerful federal indirect tax body, the GST Council, earlier this month, sand lime bricks and fly ash bricks will attract 12% GST, while cement bricks would be levied 28% GST. 

The GST Council is meeting on 3 June to finalise tax rates on a few commodities like biscuits, footwear, jewellery and bidis. The Council that uploaded the tax schedule on its website on 18 May immediately after approving it, said that the list will be subject to further vetting during which it may undergo some changes. That gives hope for industries seeking concessions. 

The biscuit industry is seeking exemption only in the case of the lowest priced category which is widely consumed, not in higher priced categories.

According to Mayank Shah, category head, Parle Products Pvt. Ltd, the nearly 800 manufacturing units making biscuits falling in this category will not be able to increase prices if these are subject to GST, considering that consumers in this segment are price-sensitive. At present, this category is exempt from central excise duty. “These manufacturing units bank on large volumes and work on very thin margins,” said Shah.

Meanwhile, fly ash brick makers claim that the proposed 12% GST on sand lime and fly ash bricks and the 28% tax on cement bricks will deal a blow to the industry. They said this rate will increase the cost of infrastructure creation as well as the cost of implementing welfare schemes such as housing for all by 2022.

The 12% tax on sand lime and fly ash bricks will lead to closure of more than 20,000 small and medium enterprises producing them across the country, said Avinash Pareek, Secretary, Association of Fly Ash Products Manufacturers (AFAPM). 

AFAPM made representations to various government departments and to the GST Council last week seeking tax parity between sand lime-fly ash bricks and red clay bricks. “What we are seeking is a level playing field,” Pareek told Mint.

The telecom industry is another sector which has grievance over the 18% GST rate proposed on their services to consumers, compared to the 15% service tax it currently attracts.

The government, however, is of the view that availability of tax credits will keep the actual tax burden on this industry lower than the headline rate of 18%.

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