In the wake of rumours over hiking Goods and Services Tax (GST) rates, fast moving consumer goods (FMCG) companies, including Nestle, PepsiCo, ITC have requested the government not to increase rates as it will further dampen the consumer demands.
“The industry has been struggling to maintain its operations under severe financial constraints and any increase in GST rates will hit the sector very hard to the detriment of the farmers, industry and government,” said a letter from All India Food Processors’ Association to the finance minister.
The letter was sent in the backdrop of reports that say the GST Council is planning to tax certain items, which are currently exempted from GST and increase rate on products under 5 per cent to 10 per cent bracket, keeping in view the falling GST collection.
The reason might be to restructure the rates that may further help the government to generate additional revenues of Rs 1,000 crore per month. During a press conference last Friday, Finance Minister Nirmala Sitharaman said that she had not discussed GST rate hike with her team yet.
“The buzz is everywhere except in my office. I have had no conversations on the GST Council meeting with my team yet,” she had said, however she did not ruled it out.
Falling cess is something which the finance ministry had been flagging in recent meetings. The GST Council may deliberate on raising cess on some products to meet the growing need for compensation, among other issues. The GST Council is planning to meet on December 18.
According to the letter, any such move will be further decrease the demand for such products. FMCG companies are already struggling with falling consumer demands.
“Industry has been constantly requesting you to shift food products currently taxed at 12 per cent to 5 per cent. The government has not so far agreed to this request and now, on the contrary, the industry is faced with the unjust proposal of increasing the GST rates,” it said.
In the last GST meeting, the council decided to increase taxes on caffeinated drinks — which includes cold drinks and energy drinks — to 28 per cent from 18 per cent. An additional cess of 12 per cent has been imposed on such beverages.
GST rate cuts demanded The FMCG industry has been requesting the finance ministry to shift food products currently taxed at 12 per cent to 5 per cent, but the government has not agreed to this so far, according to the All India Food Processors’ Association (AIFPA