I refer to our letter of 31 March 2007(Copy enclosed for your ready reference) in support of biscuit industry’s request for refixing the rate of VAT on Biscuits at 4%. I am also enclosing the Indian Readership Survey (IRS) data for the years 2003,2004 and 2005 which compares the penetration of Biscuits at All India level as also state-wise other food & beverage categories viz. Instant noodles, Malted Food drinks, Tea, Coffee, Soft drinks, Chocolates & Confectionary. The information is segregated into Urban, Rural and Urban & Rural.

I wish to draw your kind attention to the following points:-

• Biscuit as a category is mass market food product which is corroborated by IRS survey. (Copies enclosed) This statistical survey is the most reliable source of data pertaining to consumption patterns across the different segments of the society.
• Biscuits is a very nutritions, higiecnally made product food providing a range of healthy and tasty categories at affordable prices, to all sections of consumers and as a part of food substitute.
• The imposition of VAT at the highest rate 12.5% has adversely affected the Biscuit manufacturers in the country.
• The imposition of VAT at the highest rate does not compare favourably with other food products like potato chips, jams and jellies which do not have any nutritional value and have a lesser rate of VAT in most States.
• Other similar food products like Sweets, Namkeens, Bhujia, Bread, Atta, Maida, Besan and Suji have been exempted from VAT.
• The manufacturers of Biscuits have been holding on to the prices for the past more then 5 years inspite of inflationary conditions and highly competitive marketing scenario. On the other hand, levy in VAT @12.5% has impacted the ability of the manufacturers to sustain the current level of prices which will be a blow to the industry growth and the consumption pattern of the masses.
• Children form a large part of the consumer base for biscuits. In fact organizations like the WHO through their WFP programme have sourced biscuits from India for supply to children in other countries due to the nutritional content in them.
• Biscuit manufacturing is a highly labour oriented process. The 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, while 50% (approximately) of the total volume of sales comes from rural sector.
• The growth of Biscuit Production has a ripping effect on the agriculturists since they from 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 croes worth of there agriculture products.

The Association would therefore once again request you to kindly consider our plea and review the high rate of VAT on biscuits bring it down from 12.5% to 4% and provide the right climate to the industry, in the next meeting of the Empowered Committee on VAT.

Thanking you,