I am writing this to draw your kind attention to our various representations submitted to you on the hardships and losses faced by biscuits manufacturers on account of levy of Value Added Tax (VAT) on Biscuits at a very high rate of 12.5% in the State.

Large number of biscuit manufacturers in the country, majority of whom belongs to the Small Scale & Medium sector, are faced with a crisis for survival mainly due to imposition of VAT @ 12.5%, and have become unviable. It is apprehended that many of them may be constrained to close shutters in the near future, unless relief in Value Added Tax is provided.

I would therefore once again request you to kindly consider the industry’s request and appropriately review and reduce VAT on Biscuits to 4%, to save a large number of small & medium biscuit manufacturers from imminent closure resulting in unemployment to lakhs of direct and indirect employees and small retailers.

Though prices of various categories of Biscuits have remained static for more than three years, even as the cost of production has increased manifold. In this regard. I draw your kind attention to the enclosed Statement showing steep increase in the major raw materials/inputs /fuel etc. during last one year together with the impact on the cost of production of Biscuits, which is a high volume-low margin food product, predominantly consumed by the lower strata of society with a highly competitive marketing system.

The Industry has been holding on to the prices for more than past three years in spite of inflationary conditions and highly competitive marketing scenario. On the other hand, levy in VAT @12.5% has impacted the ability of the manufacturers, majority of whom are the in SME Sector, to sustain the current level of prices which will be a blow to the industry growth and the consumption pattern of the masses.

The imposition of VAT at the highest rate of 12.5% does not compare favorably with other food products like bread, potato chips, jams and jellies, bhujia, namkeen, which do not have any nutritional value and are either exempted or have a lesser rate of VAT. Other similar food products like Sweets, Fruit Juice, Atta, Maida, Besan, Suji etc have also been either exempted from VAT or levied at minimum rate of 4%, and even on luxury items like Dry Fruits which are high end products.

Biscuit which is the common man’s food, deserves to be encouraged and treat at par with all other food products for the purpose of levy of VAT @ 4%.

In this connection I also wish to draw your kind attention to the following additional points in support of our request for reduction of VAT:-

• Biscuit manufacturing is a highly labour oriented process. The organized industry directly employs 3.25 lakh people and indirectly imparts employment to about 35 lakh people. Biscuits are sold in approximately 25 lakh retail outlets, majority of which are small kirana/general shops, in rural and urban areas, while 50% (approximately) of the total volume of sales comes from rural sector. The unorganized segment also employs a similar member of direct and indirect workers.
• Biscuit as a category is a food product consumed by the masses which is corroborated by IRS survey. (Copy enclosed) This statistical survey is the most reliable source of data pertaining to consumption patterns of Biscuit as compared to other food products across the different segments of the society.
• Biscuit is a very nutritious, hygienically made product food providing a range of healthy and tasty categories marketed at affordable prices, to all sections of consumers and as a part of food substitute especially to the weaker sections of the society.
• Children and senior citizens form a large part of the consumer base for biscuits. In fact organizations like the WHO through their World Food Programme (WFP) have sourced biscuits from India for supply in other countries due to the nutritional content in them.
• The growth of Biscuit Production has a ripping effect on the agriculturists since they form a large part of the raw material base used in the manufacturer of biscuits, such as wheat flour, vegetable oil, sugar, milk etc. It is estimated that Biscuit Industry utilize more than Rs 3200 crores worth of these agriculture products.

On the other hand levy of VAT @ 4% would result in increase annual growth of 25%(as compared to 12% in 2006-07 as also in the first three quarters of 2007-08, As a result, loss of revenue to the State Govt would be compensated to a great extent.

On behalf of the biscuit industry, IBMA would like to assure that the benefit of reduction in VAT would be passed on to the consumers.

IBMA as the apex forum of Biscuit Industry have already represented for reduction of VAT to4% to all other State Governments as also to Shri Asim Dasgupta, Chairman, Empowered Committee, an d we have been assured that the matter will be sympathetically considered.

I am sure that with your kind support on our plea, a favourable decision will be taken at the earliest to save the industry, traders and lakhs workers.

On behalf of the Association and on my own, I would once again request you to kindly consider our plea to review the high rate of VAT on biscuits and reduce the same to 4%, providing relief to manufactures, traders, lakhs of workers as well as for the benefit of consumers.

Thanking you,
Yours faithfully