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While it is a matter of great satisfaction that the Government of India after 3 years, acceded to our persistent demand and granted reduction in Excise Duty (from 16% to 8%) in the Union Budget for 2003-04, taxation, both at the Central , State and local levels continue as major deterrent impeding the capacity utilization, which presently range between 50% to 60%. On the other hand, per capita consumption of Biscuit ( 2.25 Kg.), is very low in India, as compared to 4.25 kg in South East Asian country, 7.5 kg in Japan and 10 kg in USA, UK and Europe.

The Federation of Biscuit Manufacturers of India, in its Pre-Budget Memorandum for 2004-05 has urged the Union Finance Minister to exempt biscuit from Central Excise Duty, at par with the other food products such as juices, jams, wafers, sauces, namkeens, bhujias, mixtures, dairy products, packed tea, regular coffee, etc. The text of the FBMI Pre-Budget Memorandum is given in ANNEXURE-I.


While the Central and State Governments have identified Food Processing Industries, including biscuits, sun shine industries that need to be encouraged for growth and development in the coming years, however, regressive measures viz- high dozes of taxes on food processing industries, has adversely affected industries like biscuit and eroded their profitability and viability. In the case of biscuit Sales Tax is levied between 8% and 16% by various State Governments. Besides, biscuit is also subjected to other local levies i.e. Turnover Tax, Entry Tax, Octroi, etc. Biscuit manufacturers have also to pay Central Excise Duty, Sales Tax, etc. on raw materials / inputs as also packaging materials. Another adverse impact of higher rate of Sales Tax is that this would result in pushing unhygienicaly produced biscuit made by the unorganized sector into the markets. The present rate of more than 15% has considerably reduced the turnover of biscuit manufacturers and result in widespread sickness in the industry, which already has 40% to 50% idle capacity. While the industry has generally welcomed the introduction of Value Added Tax (VAT) replacing Sales Tax in the states, the Federation is perturbed that biscuit has been included for levy of VAT @ 12.5% i.e. Revenue Neutral Rate, whereas items of mass consumption similar to biscuit such as bread, etc. are proposed to be subjected to 4% VAT, classified as “ items of mass consumption”. Text of the FBMI representation submitted to the Member-Secretary, Empowered Committee on Sales Tax / VAT is given in ANNEXURE –II, together with rates of Sales Tax on biscuit in various States.

The Federation has urged the Empowered Committee on Value Added Tax (VAT) and the Chief Ministers of various State Governments to levy VAT on biscuit @ 4%.


A suggestion has been received that we may urge the Union Finance Minister and Chairman,CBEC, to exempt biscuits from Cenvat (which was reduced from 16 to 8% in the 2003-04 Budget), on the ground that while on the one hand excise duty, sales tax etc on important inputs like Veg.Oil ets are going up, biscuit is also subjected high rates of Sales tax(proposed to be replaced with 12.5% VAT), on the other hand, similar food products such as Bread, Jam, Sauces , namkeens etc are not only exempted from Excise duty, but also from sales tax etc.

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