India's new GST tax regime comes in for criticism

India's pan-industry business association ASSOCHAM has hailed the central government's new GST regime, a move to standardise goods and services tax rates in the country, as the biggest economic achievement in the three years since Prime Minister Narenda Modi took office. However, as just-food reports, there is some concern about the new framework's potential impact on value-added products.

Food industry executives and experts in India have called for a simplification of the country's incoming goods and services tax (GST) regime as it applies to food, criticising the levying of higher rates on value-added manufactured foods that can drive market growth.

With the nationwide tax being levied from 1 July, the announcement of a wide variety of rates by India's GST Council last week has caused concern, which is rather ironic given a key aim of the reform was to streamline sales taxes – until now a patchwork of national, state and municipal charges.

Rather than food being subjected to one or two rates – which is standard practice in most developed markets – the Indian system will see food products covered by zero, 5%, 12%, 18% and 28% tax rates. To some extent, the logic behind the decision has been to lower GST for basic items bought by poor consumers but there are additional complexities throwing up some potentially market disrupting anomalies.

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