GST will be a game changer for the business environment in this country. We know that this is a complex process and all of us in the industry have to play our part for successful implementation of GST.
The Government of India has made items such as cereals and food grain GST-free and imposed a 5 per cent levy on branded food grain and cereals. This seems to imply that items that are packaged are to be taxed while those that are not packaged would not be taxed. The perception seems to be that packed items are not good for consumers and companies selling the packed items are making more money.
The truth is far from it. Packaged commodities are essential to the wellbeing of this country. Companies that package goods take responsibility for what they sell. This creates guarantees for customers. This is completely missing in the case of the commodities that are sold in loose. The Food Safety and Standards Authority of India (FSSAI) encourages proper packaging and fortification in the country. In this scenario, taxing of branded packaged products is not only unfair to the manufacturer/packer, but also to consumers as it takes away any incentive to provide information and assurance about healthy wholesome commodities to consumers.
This move to tax packaged commodities may take Indian market and the consumer movement several decades backwards and will mark the beginning of the movement from packaged commodities to loose, unpacked commodities and put consumers at a great risk.
Packaging is critical for transportation, preservation, quality, shelf life, protection against the elements and against adulteration etc. It is observed that in case of commodities such as milk, water, edible oil, honey, grains, tea, atta, sugar that are sold in loose form, the adulteration is as much as 80-90%. Any adulteration in packaged commodities is traceable since the name of the packer/manufacturer is specified.
India has had adulteration as a big issue and when people take additional step towards packaging, keeping it in hygienic conditions, giving it to customers, putting their name on it, they are giving them a guarantee.
We believe that packaging and branding is an additional service and the Government should incentivise this rather than disincentivise.
– by Gautam Jain
Gautam Jain is Director – Advocacy and Chief Financial Officer at Retailers Association of India. He is a Chartered Accountant by qualification with wide industry knowledge and experience.