BENGALURU: The Union Finance Ministry’s notification issued on September 22, which makes it more stringent for unregistered brands of foodgrains and pulses to get exemption from the 5 per cent Goods and Service Tax slab, will increase the burden on consumers, according to the city’s leading food grain merchants’ association. Speaking to Express, Ramesh Chandra Lahoti, president of Bangalore Food Grains and Pulses Merchants said, “Prices of food grains will go up by `2 to `4 with immediate effect due to the gazette notification.”
The tough conditions laid down in the notification ensures that all small-time players who sell cereals, pulses, wheat, flour and dal in bags with their own logos will have to pay GST. “All big branded players in the foodgrains business who had registered their companies came under the GST regime since July 1. Since unbranded products were left out, this loophole was exploited by many branded firms to escape from payment of GST. This issue was spelt out during the GST Council meet on September 21 at Hyderabad,” he said.
As per the notification, any person using a brand name who wants exemption from GST needs to file an affidavit with the Commissioner of Central Tax or State Tax that he is voluntarily forgoing the right to the name. The owner needs to print the same in indelible ink or the container of the product, it states. “How can an item like gold, bought only rarely by a family, have only a 3 per cent GST levied on it while essential food items have 5 per cent tax levied on it?” he questioned.
Food items need to come under the special tax category as people purchase them daily, unlike a luxury item like gold. “Food products should not be taxed or should be taxed a maximum of 1 per cent. There should be no ambiguity about it. It should be uniformly levied on branded and unbranded products,” Lahoti, also a FKCCI member, emphasised.
Only 10 per cent of the food grain industry is branded and this will impact 90 per cent of the unbranded market, he said. “There is only a 1 per cent profit margin for wholesalers. It is not fair to levy 5 per cent tax on such items which form staple food of the common man,” he said.
“I deal in pulses and cereals myself and have stocked my shops with hundreds of bags. From tomorrow, I plan to levy this 5 per cent GST on any product purchased from me. It will be the same with all wholesalers. Retailers will pass on the burden to the consumer. How can I rush and carry out all these formalities from today to get GST exemption?” he questioned.
Chairman of State Taxes Committee, Federation of Karnataka Chamber of Commerce and Industry, B T Manohar said, “The idea behind the notification is to widen the tax bracket. Many companies manufacturing food items started deregistering their brands as they had to pay the GST from July 1.”
Asked if traders were aware of the issue, Lahoti said, “It had been debated since September 9 and every trader knew it was coming.” This move will encourage unethical practices and manufacture of inferior goods using someone else’s brand name, he added.