Budget time is the time when the common man awaits for tax reduction and the corporate world awaits to see in which direction they will direct their industry.
The expectations of the food industry were to a large extent fulfilled as they have got relief on corporate tax. The food manufacturing and processing sector will pay a lower rate of corporate tax at 25% from the prevalent 30%, over a period of 4 years. This should give an impetus to the food industry which is a sunrise industry. India’s food processing has a wide range of products and includes basic foods like fruit, vegetables, meat, fish, poultry, dairy and dairy products, fermented foods and beverages, grains, cereals, bakery and confectionery products and even nutraceuticals. Among these Ready to Eat and Ready to Heat Foods are becoming extremely important and they could be gainers with this Union budget too.
Besides lower rates of corporate tax those in the frozen food sector should be delighted with the relief in service tax exemption. Other areas where the service tax exemption would benefit the food industry are that the service tax exemption has been extended to services of pre-cold cold storage of fruits and vegetables. This will encourage the food industry and will also reduce wastage which has been one of the major aims of the Food Processing Ministry.
Food industry includes manufacturers, packaging material supplier, equipment suppliers and transporters and all these related industries will now be looking to explore the opportunities with the lowering or corporate tax as also exemption of service tax. The excise duty on the food processing and packaging industry was already been reduced from 10% to 6% in the last budget which was presented by Mr. Arun Jaitley in July 2014.
In 2014 the stage was set for the Make in India label and the Union Budget has worked around to ensure that the Make in India label gets an impetus. The domestic food manufacturing hub has got a shot in the arm with the ‘World through Skill India’ and the ‘Make in India’ programme. These will provide employment opportunities in the food industry and indirectly in the testing laboratories which are intimately related to the food industry.
There will be more manufacturing clusters and these will require more skilled labour and hence there is likely to be an increase of the educated and skilled unemployed. Going with the ‘Make In India’ campaign initiative, the FM has ensured that the regulatory mechanism will be made easy to do new business in India especially from the foreign players who want the simplified norms for clearance and processing of applications. FM has laid stress on the publicly stated guidelines and procedures to boost investments and to make India as a favourite destination for investments.
Transportation of agricultural produce is to remain exempt from service-tax and the transportation of ‘food stuff’ by rail, or vessels or road will be limited to transportation of food grains including rice and pulses, flours, milk and salt only
Consumers will be paying more for dining out as service tax goes up by 2% to 14%. Aerated drinks have been exempted from additional excise of 5% till the enactment of the bill. However, since the basic excise duty on these is being increased from 12% to 18 % aerated drinks including bottled water are likely to become more expensive.
On the whole the food manufacturing industry has a lot to look forward to especially through the domestic manufacture under the Make in India label.