Wednesday, June 19, 2024

Food Firms Clash with GST Authority Over 18% GST on Snack Categories

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Top food companies in the country are currently at odds with the Directorate General of GST Intelligence, the primary tax authority, over the implementation of an 18% goods and services tax (GST) on snack foods, according to a report by A2X Tax Corp LLP.

The disagreement stems from a recent government clarification categorizing snacks as either extruded or non-extruded. Extrusion is a food processing technique involving the pushing of ingredients through a machine to achieve a desired shape, commonly used in the production of many ready-to-eat snacks. Examples of extruded snacks include finger snacks like PepsiCo’s Kurkure, Prataap Snacks’ Yellow Diamond puffs and rings, and ITC’s Bingo Mad Angles. On the other hand, biscuits and potato chips are classified as non-extruded snacks. Industry experts estimate that extruded snacks contribute 25-30% to the total salty snacks market worth Rs 47,000 crore, with the remaining share coming from non-extruded snacks.

While food companies have been paying a 12% GST on snacks overall, the GST Intelligence body is now insisting on an 18% GST for extruded snacks and maintaining the 12% rate for non-extruded snacks, according to reports.

Sources within the food industry have revealed that the aforementioned companies, along with a few others, have received notices totaling approximately Rs 1,000 crore in terms of additional GST to be paid by them. However, there has been no official confirmation of this report as of yet.

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