09.03.2024 Food firms, GST authority spar over 18% tax rate on snacks

Some of the country’s top food companies such as ITC, PepsiCo India, Balaji Wafers and Prataap Snacks are in disagreement with the Directorate General of GST Intelligence, the apex tax body, regarding the imposition of an 18% goods and services tax on snack foods.

The issue concerns a recent clarification by the government, classifying snacks as extruded and non-extruded, according to food industry sources that FE spoke to. In food processing, extrusion involves pushing ingredients through a machine to attain the desired shape. Many ready-to-eat snacks are produced through this process. For example, finger snacks like PepsiCo’s Kurkure, Prataap Snacks’ Yellow Diamond puffs and rings and ITC’s Bingo Mad Angles are examples of extruded snacks. Biscuits and potato chips are non-extruded snacks. Extruded snacks contribute 25-30% to the total Rs 47,000-crore salty snacks market, according to industry experts. The rest is contributed by 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 12% for non-extruded snacks.

Food industry sources have indicated that the above-mentioned players, including a few others, have received notices totaling around Rs 1,000 crore in terms of additional GST to be paid by them. A mail sent to ITC remained unanswered till the time of going to press. Executives at PepsiCo and Prataap Snacks were not immediately available for comment.

Recent months have seen a flurry of GST notices go out to not just food firms, but also non-food firms for discrepancies in payment of GST. Issues related to mismatch in tax payment, wrongful availment of tax credits and discrepancies in tax returns filed for the financial years 2017-18, 2018-19 and 2019-20.

Source: Financial Express

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