CA Pooja Indani
Basic necessity for a prosperous living for any human being is food, clothing & shelter. Out of these three, food contributes as a major necessity. Changing lifestyles and appropriate fiscal policies has given a considerable push to the food processing industries. India holds tremendous potential to grow in food sector. Study has shown that India is highest producer of milk, second largest producer of fruits & vegetables, third largest producer of food grains & fish & has the largest livestock population.
But, due to absence of modern cold storage facilities, India incurring post-harvest fruits & vegetable losses. Adequate focus on this sector will greatly boost up the overall GDP of economy. India already is a leading exporter of several food products, to ensure that this sector should gets incentive it deserves, Ministry of Food Processing Industry is implementing a number of schemes for Infrastructure development, technology up-gradation & modernization, human resource development & R& D in Food processing sector.
Government has given tax benefits to these industries so that this sector can steadily concentrate on contribution to overall GDP growth.
Here are the Indirect tax benefits for Food Processing Industry
A) NEGATIVE LIST
SEC 66D OF FINANCE ACT,1994(AS AMENDED)
Service provided in relation to Loading,unloading,packing,storage or warehousing of agricultural produce is not taxable at all.
Notification No. 25/2012 dated 20/06/2012(AS AMENDED) provides list of services which are exempt from payment of Service Tax, from which exemptions to food processing industries, cold-chain facilitating centers have also been given which are as follow:-
I) No. 14
Services by way of construction, erection, commissioning or infrastructure of original works pertaining to
(d) Post-harvest storage infrastructure for agricultural produce including a cold storages for such purposes or
(e) mechanised food grain handling system, machinery or equipment, for units processing agricultural produce as food staff excluding alcoholic beverages.
II) No. 20 & 21
Services by way of transportation by rail or vessel from one place in India to another & by a Goods Transport Agency of the following goods.
i) Agricultural Produce
ii) Milk, Salt & food grain including flours, pulses & nice.
III) Sr. No. 40
Services by way of loading, unloading, Planning, Storage or warehousing of rice, cotton, ginned or bailed. Notification No. 6/14 ST dt. 17/07/2014
i) No. 12/2012 dt 17/03/2012 exempt to specified goods intended to be used for the installation of a cold storage, cold room or refrigerated vehicle for the presentation, storage or transport of agricultural, apiary, agricultural, dairy, poultry, aquatic and marine produce and meat.
The exemption is subject to condition that
i) The goods are cleared for the intended purpose &
ii) The procedure laid down in the CE ( Removal of goods at concessional rate of duty for manufacture of Excisable goods) Rules, 2016(Notification No. 20/2016 dated 01/03/2016) is followed.
In this context, a doubt has been raised whether the benefit of the said exemption can be extended when the person procuring the goods for the installation of a cold storage/cold room/refrigerated vehicle is not a manufacturer. This doubt has arisen as the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 relate to a ‘manufacturer’ of excisable goods.
The matter has been examined, it is the intention of the Government not to deny excise duty exemption to any type of user (whether manufacturer or not) of the specified goods who intends to use these for the installation of a cold storage , cold room or refrigerated vehicle for the preservation, storage or transport of agricultural produce.
In fact, so long as the procedural requirements of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 are complied with, the benefit of the subject exemption in respect of the goods specified in List 7 annexed to Notification No. 12/2012-C.E., dated 17-3-2012 when these are supplied for installation of a cold storage, cold room or refrigerated vehicle for preservation, storage or transport of agricultural produce should not be denied solely on the ground that the person receiving the specified goods is not a manufacturer of excisable goods.
ii) there are other immunities also provided to this industry with having a lower % of excise duty some out of it are as follows:-
a) Nil excise duty on milk, milk products, vegetables, nuts & fruits, fresh & dried
b) As against standard excise duty of 12%, processed fruits & vegetables carries a merit rate of 2% without CENVAT or 6% with CENVAT
c) Soya Milk Drinks, flavored Milk of Animal origin also carry a duty of 2% without CENVAT or 6% with CENVAT
Government has provided following Project Import Benefits:
i) Projects for the installation of mechanized food grain handling systems and pallet racking in ‘ Mandis’ and warehouses for food grains and sugar;
ii) Cold storage, cold room (including for farm level pre-cooling or industrial projects for preservation, storage or processing of agricultural, apiary, horticultural, diary, poultry, aquatic and marine produce and meat.