High taxes hitting food processing sector: Assocham

New Delhi, Nov 29: Taxation of over 18 percent on branded processed agricultural products is adversely affecting the competitiveness of the sector, an industry lobby has said in a report released Sunday.

According to the Associated Chambers of Commerce and Industry (Assocham) in India, only about 2 percent of India's fruit and vegetable output is processed and produce worth Rs.50,000 crore is wasted annually.

The chamber observed that branded processed products are subject to central sale tax of about 2 percent, apart from attracting 4 percent local levies including entry tax and octroi, besides 12.5 percent of value-added tax.

"However, unbranded products are mostly exempted or taxed at concessional rate of 4 percent," said Assocham president Swati Piramal, adding: "It acts as a disincentive for investment in the sector and affects competitiveness."

Assocham said that as branded products carry the brand owner's assurances on quality and hygiene, it was "unreasonable to make these more expensive by levying higher taxes".

Accordingly, all food products should be treated with parity in terms of rate of taxes such as VAT, it has argued.

"The processed food industry should also be exempted from levy of service tax on goods transport service, mass communication and awareness building activities," Piramal said.

"This will help in generating rural employment, ensure fair prices for farmers, reduce wastages and spread the benefits of economic growth to rural areas," she added.

According to Assocham, with every person directly employed in processing, about 100 people get employment in related functions like storage, transportation, packaging, supplying ingredients, distribution, technology inputs, plant and equipment, and testing and analysis.