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Barring dairy processing, food processing sector not covered in Budget
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Friday, 03 February, 2017, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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With the exception of dairy processing, and old ideas like contract farming and linking fruits and vegetables to processing unuts, the Union Budget for fiscal 2017-18 has not covered the food processing industry well.
Admitting that dairy was an important source of additional income for the farmers, finance minister Arun Jaitley announced that a dairy processing and infrastructure development fund would be setup in the National Bank for Agriculture and Rural Development (NABARD) with a corpus of Rs 8,000 crore over three years.
The sector was expecting more on research and development (R&D) in the food processing sector and some other incentives like investment and deduction allowance to help manufacturing.
Piruz Khambatta, chairman, Rasna Pvt Ltd, said, “We’re expecting that the government would allow the industry to put profits in special account for business development used by the company over next some year and also getting tax rebate.”
“This would encourage the private sector investment in manufacturing, thereby boosting the food processing sector, which is run by the micro-, small and medium enterprise (MSME) sector primarily,” he added.
Khambatta added that linking fruit and vegetables to the processing sector was an old idea, while the proposal of a model law for contract farming was also in existence for quite some time.
Meanwhile, Jaitley, while presenting the Union Budget, said that the income tax for smaller companies with an annual turnover upto Rs 50 crore would be reduced to 25 per cent in order to make MSME companies more viable and also to encourage firms to migrate to the company format.
He said, “As per data of Assessment Year 2015-16, there are 6.94 lakh companies filing returns, of which 6.67 lakh companies fall in this category and, therefore, percentage-wise, 96 per cent of the companies will get this benefit of lower taxation. This will make our MSME sector more competitive as compared to large companies.”
However, the industry reacted to this cautiously, saying that the terminology used by the finance minister was about companies, while it should be businesses to be able to applied uniformly to theMSME sector.
“Why did they say companies? It should have been termed as businesses. Because there can be proprietorships and partnerships worth Rs 1 crore or whose turnover is Rs 2 crore turnover, which are not companies,” said S Jindal, president, All India Food Processors’ Association (AIFPA).
“The term company has a particular legal entity in the financial jargon. I hope it covers all businesses. We need to see how it will be manifested in the actual term in the notification,” he added.
Jindal stated that most of the MSMEs were either proprietorshipsor partnerships, and only if the turnover was beyond Rs 10crore, it would become a private limited company.
“When it is termed an MSME companies worth Rs 50crore, it is about the upper cream,and not the bulk of the MSME sector,” he added.
Further, the experts stated, ”All the measures announced by the government should be combined with the model goods and service tax (GST)law and lower rates would help the food processing sector. Otherwise it would be a half-hearted effort for the industry.”
Meanwhile, Jaitley stated that the GST Council had finalised its recommendations on almost all the issues based on consensus after spirited debate and discussions.
He added that the government, on its part, had promptly given effect to various provisions of the Constitutional Amendment Act, including the constitution of the GST Council.
The GST Council held nine meetings to discuss various issues relating to the levy, including broad contours of the GST rate structure, threshold exemption and parameters for composition scheme, details for compensation to states due to implementation of GST, examination of draft model GST law, draft IGST law and the compensation law and administrative mechanism for GST.
The finance minister said the preparation of an IT system for GST was also on schedule.
He added, “The extensive reach-out efforts to trade and industry for GST will start from April 1, 2017 to make them aware of the new taxation system. He said that since the enactment of the Constitution (One Hundred and First Amendment) Act, 2016, there has been substantial progress on preparatory work towards ushering in GST, which is by far the biggest tax reform since Independence.”
“Several teams of officers both from the states and Central Board of Excise and Customs (CBEC)have been working to give finishing touches to the Model GST law, rules and other details,” Jaitley said.
He added that the government, through the CBEC, shall continue to strive to achieve the goal of implementation of GST as per schedule without compromising the spirit of co-operative federalism.
Jaitley said that the implementation of GST was likely to bring more taxes, both to the Central and State Governments because of the widening of the tax net.
He added that not many changes have been proposed in the current regime of excise and service tax in the Budget proposals since they are to be replaced by GST soon.
On agriculture front, the government said, “With a better monsoon, agriculture is expected to grow at 4.1 per cent in the current year (i.e.2016-17) as the total area sown under the kharif and rabi seasons are higher than the previous year.”
Jaitley said, “Adequate credit would be made available to the farmers in time and the target for agricultural credit in 2017-18 has been fixed at a record level of Rs 10 lakh crores.”
He added that about 40 per cent of the small and marginal farmers availed credit from the cooperative structure.
“The Government was committed to support NABARD for computerisation and integration of all 63,000 functional primary agriculture credit societies (PACS) with the core banking system of District Central Cooperative Banks,” Jaitley stated.
This will be done in three years at an estimated cost of Rs 1,900 crore, with financial participation from the state governments to ensure seamless flow of credit to small and marginal farmers.
The coverage of National Agricultural Market (e-NAM) will be expanded from the current 250 markets to 585 APMCs. Moreover, assistance up to a ceiling of Rs75 lakhs will be provided to every e-NAM market for establishment of cleaning, grading and packaging facilities.
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