High GST on several processed Agro-food items will be a serious detriment for the growth of the industry as food processing is an agro-based industry which makes its purchases in cash and directly from the farmers. If Agro-Food processing industry was pushed to the corner, it would adversely impact the farmers.
Citing the case of pickles, Rajheev Aggarwal, CEO of Nilon’s Enterprises Pvt Ltd explained: “26 of the 29 states of the country tax pickles at the rate of 5 per cent. Karnataka imposes none, while Rajasthan and Kerala impose VAT on pickles at a higher rate. Add 2 per cent Excise to it and 0.2 per cent Octroi on a weighted average basis. That totals to 7.2 per cent tax on pickles at present, which the GST Council intends to raise to a whopping 18 per cent.”
The market, says Aggarwal, is so fiercely competitive and price sensitive that the industry operates with a paltry 2 per cent margin. If the proposed GST rate was implemented, the industry, unable to bear the burden, will be compelled to increase the prices of pickle in the range of 10-14 per cent.