Foodgrain such as wheat, rice and pulses might become cheaper after the goods and services tax (GST) system kicks in later this year, as the GST Council has decided to keep them zero-rated under the new tax regime.

 

Commodities like edible oil, tea, coffee and sugar are also likely to cost less as the proposed five per cent tax rate is either lower than the existing taxes in most places or is same as the currently levied value added tax (VAT).

 

For cereals, some industry players said unless something was done about the mandi tax and cess, just keeping them zero-rated under the GST regime might have nominal impact. 

 

 

The government claimed that in many cases, the total incidence of taxation went up to 11 per cent. 

 

“A bigger impact would be known once the rates on processed food are revealed,” said Veena Sharma, secretary of Roller Flour Millers Association of India. 

 

B V Mehta, executive director, Solvent Extractors’ Association of India (SEA), a lobby group of edible oil traders, said that though they had represented the government to keep edible oils zero-rated in line with foodgrains, the proposed five per cent tax rate was also not a big letdown, as in most states they were already paying five per cent as VAT.

On coffee, Ullas Menon, secretary general, United Planters Association of Southern India (UPASI), the apex body of the plantation crop growers in the south, said the five per cent rate for coffee and tea was reasonable and that was what industry also expected. Current average rate was around four per cent. 

 

Rohan Colaco, a former executive committee member of Karnataka Planters Association, termed the tax reform as something which would be beneficial in the long-run.

 

N Dharmaraj, wholetime director and chief executive, Harrisons Malayalam Ltd, a RP Goenka Group company, thanked the government for fixing the GST rate on tea at five per cent.