IBMA being the premier Association of Biscuit manufacturers in the country, especially in the Small & Medium Sector, wish to draw your immediate attention to Notification No II(1)/CTR/30(a-5)/2007 dated 23 March 2007(Under G.O.No.79 Commercial Taxes Registration(B2), 23rd March 2007, as published in Tamil Nadu Government Gazette Extraordinary(No.76) dated March 23, 2007 reducing rate of VAT on unbranded bakery products (including bun, rusk, biscuits and cakes) under Entry No. 09, Part-B, Schedule-I) to 4%.
However the reduction in VAT rate for only unbranded bakery products to 4% has adversely affected the biscuit manufacturers and traders in the State, majority of whom in Small & Medium Units(SMEs), and IBMA would therefore appeal to the Hon’ble Chief Minister to extend the reduction VAT to all manufacturers also and issue instructions for notifying that the rate of Value Added Tax on both branded and unbranded Biscuit and other bakery products shall be levied at@ 4%.
In this connection, we give herein-below few points in support of our appeal to fix Value Added Tax on Branded Biscuit also at 4% for your kind consideration:-
- Biscuit is a nutritious snack food hygienically processed & packaged, available at a very reasonable prices and consumed by the low income group and economically weaker sections of our society.
- Biscuit is a part of the food processing industry, recognized as a thrust area by the Govt of India as well State Governments for encouragement to grow so that it is abundantly available at lower prices to the common man.
- Biscuit, being an agro based food product, is manufactured mainly using agri products, i.e. Wheat, Vegetable Oil, Sugar, Milk etc. and therefore growth of production and consumption of Biscuit would benefit the farmers of these agri products. However, sharp increase in the prices of Wheat/Maida, Veg.Oil ,Sugar etc has already caused immense hike in our cost of production and marketing.
- In addition to Value Added Tax, biscuit is also subjected various other local levies. i.e. Purchase Tax, Entry Tax/Octroi etc as also taxes/duties /cess etc on our ingredients, inputs, packaging material, equipment etc.
- As regards Value Added Tax is concerned, the State of Assam has fixed VAT at the rate of 4% on Biscuits(without any differentiation of branded or unbranded). Other State Governments are also favourably considering our representation for fixing 4% VAT on biscuit.
NO OTHER STATE GOVT IS LEVYING VAT DIFFERENTLY ON BRANDED AND UNBRANDED BISCUITS OR ANY OTHER BAKERY PRODUCTS.
- Biscuit manufacturers and trading community in our State predominantly consist of Small Scale & Medium Units. Biscuit production and marketing process is highly labour oriented. Biscuit industry in the country, directly and indirectly employ more than 15 lakh workers.Thousands of workers are employed in manufacturing, distribution and retail network in Tamilnadu and therefore, deserves sympathetic consideration by the State Government, with regard to levy of Value Added Tax at the minimum rate of 4%.
- Biscuit is a highly competitive high volume based food product with very thin margins of profit and therefore, SSI & Medium manufacturers and traders of biscuit are already facing stiff competition, making it very difficult for them to survive.
Our Association would also like to draw your kind attention that biscuits sold under registered brand name should not be differentiated for the levy of Value Added Tax due to the following facts :-
- Under the TNVAT Act, the differentiation is based on whether the brand name is registered or not under the Trade Mark Act. In Biscuit industry most of the biscuits are sold under brand names. On the other hand, products of the units in the unbranded(unorganized segment),are marketed under brand names which is not registered under the Trade Marks Act.
- Registration of a brand under the Trade Mark Act/Rules helps in prevention of sale of spurious and adulterated products.
- The products of branded Biscuit industry are more hygienically manufactured and are subject to various quality control measures and governed under the Food Laws, i.e. PFA Act/Rules, Standards of Weights & Measures Act & Packaged Commodities Rules etc, whereas units in the unbranded segment are not being subjected to such Food Laws and quality control measures. Most of the branded biscuit manufacturers are also implementing ISO Standards to achieve better quality products.
- Hence, reduction in the rate of Value Added Tax only to biscuit units in unbranded sector would result in increased production and sale of unhygienic products , while the organized biscuit industry producing branded biscuits of high quality, would be adversely impacted, to the detriment of consumers.
While reiterating our request for uniform rate of VAT @ 4% to both branded and unbranded categories, we would like to submit that biscuit manufacturers, especially in the SME Sector would become unviable, if the branded biscuit manufacturers are not treated at par with unbranded segment. Consequently many biscuit units would be constrained closure shutters and leading to unemployment of thousands of workers in the branded industry.
In the event of the State Govt agreeing to our request to levy of VAT on Branded Biscuit @ 4%, consumption of biscuits in the State would increase at least by 20% and hence the impact on revenue would be adequately compensated. On the other hand, prices of biscuit would come down benefiting the consumers, who are mainly from the economically weaker sections of the society.
Under the circumstances, I would request your goodself to kindly intervene in the matter consider our plea favourably and issue necessary orders to fix the rate of Value Added Tax on Biscuit (both branded and unbranded) @ 4% in Tamil Nadu.
We earnestly hope that our appeal would receive your sympathetic consideration and a favourable decision would be announced at the earliest. We in IBMA keenly look forward to receiving intimation of the notification on uniform rate of VAT on Biscuit(both Branded & Unbranded) @ 4%.
Thanking you in anticipation,
K P Mohandas
Secretary General |
