GST Revamp: A Boost for Food Processing Sector

The food-processing sector is set to thrive following the recent rationalization of GST rates, with most products now falling under a 5% GST slab. This move is anticipated to be a stimulant for economic growth within the industry.

Effective September 22, coinciding with the first day of Navratri, the streamlined tax structure aims to bring uniformity across food items and reduce the number of tax slabs. The Ministry of Food Processing Industries states that this stable environment will aid businesses in planning long-term investments and boosting economic growth.

Consumers are expected to benefit from reduced food prices, making staples more affordable. Increased consumer demand is projected to drive sales in the FMCG and packaged food sectors, further supported by reduced compliance costs and lowered litigation risks.

The new structure addresses inverted duty issues, providing immediate relief and liquidity improvement, especially for MSMEs. It resolves classification disputes arising from varying tax rates for similar products, such as packaged versus loose paneer or parathas.

With retail prices expected to decrease, demand for manufactured goods, including processed food, is set to rise. This demand surge is likely to attract more investments, drive industry formalization, and create employment opportunities within the sector.

The GST Council's 56th meeting marked a historic step by reducing tax slabs from four to two main rates—5% and 18%, along with a 40% rate for sin and luxury goods. These changes, defined as a next-generation GST rationalization, were announced after Prime Minister Narendra Modi's Independence Day speech, aiming to lessen the tax burden and bolster economic progress.

(With inputs from agencies.)