KOCHI: Finally, banana fritters, the humble ‘pazhampori’, are likely to get cheaper by 10% across bakeries in the state, following the nationwide GST tax rationalisation that has reduced the number of slabs to just two.
Banana fritters, along with snacks like ‘vada’, ‘ada’, and ‘kozhukatta’, have been moved to the lower slab of 5% from the 18% slab on which they were taxed earlier. Products like mixture and wafers that came under 12% slab earlier have also been placed in the lower slab of 5%.
As a result, bakeries in the state are planning to reduce the effective selling price by 7-10% after rationalising their cost structure, according to Vijesh Viswanath, CEO of Bakery B, which has around 50 retail outlets in Ernakulam and its suburbs. “Banana fritters will become cheaper by Rs 1 for those priced around Rs 10 per piece. Big snack manufacturers and bakers have in-principle decided to lower the selling price,” he said.
“The effective reduction in tax burden for us when the tax gets reduced to 5% from 18% is 11%, but the real benefit to bakeries is nil. Now, we will have to pay 5% tax on inputs like vanaspati and get input credit for the same,” he said.
Bakers welcome tax rationalisation
Vijesh pointed out that during the past few months, the increase in the price of inputs has been phenomenal and is burdening quality producers.
Noushad M, managing partner of Kannur-based Bake Story Live Bakery, welcomed the tax rationalisation, saying it has eliminated a major pain point. “We were often confused and penalised due to ignorance.
The 5% tax rate for all snacks and savories has brought us relief,” he said. Noushad highlighted that traditional snacks faced differential treatment due to classification issues under the Harmonised System of Nomenclature (HSN). For instance, ‘pazhampori’ was taxed at 18% while ‘unniappam’ was taxed at 5%. He added that his outlets will sell products cheaper by 7-10% from September 22.
Some snack makers had previously approached the Authority for Advance Ruling (AAR) to address this disparity which made running their business worrisome. Similarly, Indian breads like ‘paratha’, ‘porotta’, and ‘roti’ were taxed at 18% while fresh bread was exempt.
Meanwhile, advocate and GST faculty Hariharan K S said that while consumers may benefit, the bakeries themselves may not in the long-run.
“Practically, many bakeries are not charging the price at MRP and now they may reduce slightly in anticipation of anti-profiteering issues,” he said.
“When an outward supply is exempt from GST, that is, when a supply is nil-rated, then the supplier cannot take credit of the input tax paid by him on inputs and input services used in making such supply. If he has taken credit, he has to reverse it. Now, due to the newly proposed exemption, many businesses in food sector have to reverse the input tax credit already taken by them. Hence, they won’t be getting any direct benefit from the rate exemption,” he added.