GST impact: Foodgrains to get cheaper or remain flat

As the GST tax regime sets in from July 1, foodgrains such as wheat, rice and pulses might become cheaper as it will be taxed at zero rates.

At present, many loose food items like wheat, pulses attract 3-4 per cent value added tax.

Other commodities like edible oils, coffee and sugar could also cost less as the proposed 5 per cent tax rate is either lower than existing taxes in most places or same as the current levied VAT.

In cereals, some industry players said unless something is done of the mandi tax and cess, just keeping it zero-rated might have nominal impact.

The government claimed that, in many cases, the total incidence of taxation goes up to almost 11 per cent.

Apart from cereals, tax on sugar, tea, coffee and edible oils has been fixed at 5 per cent.

The proposed tax rates are almost the same as the existing VAT rates in most or are slightly lower as in the case of edible oils for Maharashtra that was 6 per cent.

Therefore, this implies that prices of most loose food items will either remain same or might fall marginally after the new tax regime kicks in.

Sugar industry meanwhile, said that proposed five per cent tax rate is on expected lines and considering the current ex-factory rate of Rs 3,600 per quintal, five per cent tax won’t make much of a difference either for mills or consumers.

However, in the case of processed and packaged branded food items that include items like jams, jellies, biscuits, breads, etc the GST has been fixed at 5-12 per cent.

Unbranded packaged food items won’t fall in this category.

Industry officials said the new GST rates are almost similar to existing VAT rates, except for some items like biscuits, which are expected to become costlier for some categories.