Biscuit makers sour over tax parity

Putting biscuits below ~100 a kg in the 18 per cent goods and services tax (GST) slab might push price-sensitive consumers towards unbranded products, say players operating in the segment. Typically, glucose biscuits are priced at ~71 a kg. The segment is the cheapest among key biscuit sub-categories such as creams and cookies, which are available at ~120-125 a kg. The GST Council on Saturday removed variable tax structure for biscuits, taxing those below and above ~100 per kg at the same rate.

Putting biscuits below ~100 a kg in the 18 per cent goods and services tax (GST) slab might push price-sensitive consumers towards unbranded products, say those operating in the segment.

Typically, glucose biscuits are priced ~71 a kg. The segment is the cheapest among key sub-categories such as creams and cookies, which are available at ~120-125 a kg.

The GST Council on Saturday removed the variable tax structure on biscuits, taxing those below and above ~100 per kg at the same rate.

This has raised the chances of a price increase in the glucose category, sector experts said.

A possible two to three per cent price increase in glucose biscuits in July, industry sou- rces said, could push consumers of branded products to unbranded ones. “We are disappointed with the rate,” said Mayank Shah, category head of Parle Products. “This goes against the principle of social justice, where the poor will carry the burden of additional tax and those who are well-off will not.” The effective tax rate at present in the glucose category is 910 per cent, while those at the premium end pay 1617 per cent.

The organised biscuit market in India is pegged at ~26,000 crore yearly and the unorganised one at ~13,000 crore. A price hike of two-three per cent in a category where the unit price varies between ~2 and ~10 could increase the size of the unorganised market by at least ~500 crore, industry sources said.

The organised glucose biscuit category, around ~5,500 crore, could shrink to about ~5,000 crore as a result.

The rate of growth of glucose biscuits, dominated by Parle-G of Parle Products, is the slowest at around four-five per cent per annum, according to sector experts.

Cream biscuits have an annual rate of growth of eightnine per cent while cookies are growing at 15-16 per cent per annum.

18% tax likely to push price-sensitive consumers towards unbranded players