The Hindu Business Line : Food processing industry taxation structure to be reviewed

THE Government intends to undertake a review of the taxation structure relating to the food-processing industry. This is in view of the demand from the major players in this sector for a lower tax burden and also to reflect the fast paced changes seen in the markets abroad.

The first step towards this end has already been taken with the Ministry of Food Processing Industries (MOFPI) asking Tata Economic and Consultancy Services (TECS) to study the entire gamut and structure of taxation in the food processing industry in the country.

The issue of taxation had been flagged by the major players in the industry at their recent interaction with the Prime Minister, Dr Manmohan Singh.

A comprehensive re-look of taxation structure is also on account of the growth potential seen for this sector in the coming years.

"We expect the turnover of the food processing sector to grow from the current level of Rs 5,00,000 crore to about Rs 10,00,000 crore in 2009-10 and Rs 14,00,000 crore in 2014-15," Mr D.P. Singh, Secretary in the MOFPI, said at an industry gathering here on Monday.

The Ministry expects the TECS report to be submitted by the end of the month after which there would be a round of consultations with the industry, said officials. MOFPI is keen that tax rates for the sector are specified on a scientific reasoning and after systematic study of the business environment.

The fact that countries such as South Africa and United Kingdom have exempted or levy very little tax on the food processing sector is likely to influence the decision making process of the Government, the officials said.

As regards the various State excise laws governing this sector, Mr Singh said that the Centre was concerned about the multiplicity of State excise laws and regulations as they were a major constraint to the growth of the industry. They also are a constraint in the free flow of technology, foreign capital and foreign direct investment.

A draft of the model excise policy that would help correct the situation has already been prepared by a joint working group of the concerned ministries and state excise commissioners for adoption by States/Union Territories. The senior MOFPI official said that model draft excise policy has already been circulated with the State Governments and various central ministries.

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