Finance minister Arun Jaitley has proposed to reduce the excise duty on certain specific food processing and packaging machinery even as he increased the excise duty on aerated beverages containing sugar.
“To incentivise expansion of processing capacity, excise duty on specified food processing and packaging machinery has been reduced from 10% to 6%,” finance minister Jaitley said in his budget speech.
“Reduction in excise duty on food processing machineries is welcome,” said Piruz Khambatta, chairman of industry chamber’s CII’s national committee on food processing and chairman of food products company Rasna.
The long-pending demand has been to put processed food products on a par with agri-produce with nil rate of excise duty, he added. This was not proposed by the minister.
However, the finance minister’s proposal to levy an additional 5% excise duty on aerated waters containing sugar did not go down well with beverage manufacturing firms.
The Indian Beverage Association (IBA) said the additional excise duty announced in the budget would hit the industry hard and lead to a slowdown in the sector.
The association, which represents fast-moving consumer goods majors such as Coca Cola India, PepsiCo India and Dabur, said the duty hike would lead to a price rise by the industry.
“... the additional 5% duty increase will be tantamount to a 40% increase in the central excise duty, which would hit the industry hard and cause a major slowdown at a time when demand has been sluggish,” IBA said in a statement.
With the hike in excise duty, the industry will have no option but to increase the price of its products, it said, adding that the soft-drinks industry is already one of the highest taxed categories in the country.