TN: Rice Mill Owners Outrightly Oppose 5% GST for Rice

The decision of the government of India to levy 5% Goods and Service Tax (GST) on packaged food will approximately inflate the price of rice from Rs 3 to Rs 5 per kilogram in Tamil Nadu, starting from July 18. All pre-packed and pre-labelled goods attract this new tax, including wheat, oats, curd, lassi or buttermilk.

Though loose rice is exempted from the tax, nearly 95% of rice sold in the State is in pre-packed form. Also, the rice mills owners association said that the food safety department under the Food Safety and Standards Authority of India (FSSAI) Act has asked traders to sell packed food products to ensure hygiene.

The rice merchants and rice mill association have urged the Tamil Nadu government to exert pressure on the Bharatiya Janata Party (BJP) led Central Government to roll back GST on essential food products. Around 3000 rice mills went on strike on July 16.

‘NOT LOGICAL’

Pulses and cereals like rice, wheat, flour and other such items, weighing below 25 kg or 25 litres, are set to attract GST at the rate of 5%.

Speaking to NewsClick, Parthiban, a rice mill owner in Trichy said, “we have to pay GST for rice that is sold in packets of 5 kgs, 10 kgs or 15 kgs, but not for selling large unpacked amounts such as 50 or 70 kgs. How does this make sense?”  

“Our customers will surely ask us to provide rice without a bill so that they can scuttle the cost added by GST. And, if we press them to take the bill, they will go to another rice mill where GST is not paid,” he added.

He also said, “or, the customer will request a reduction in the percentage of GST, and we would have to bear the rest of the tax. If the customer is ready to pay 2% GST, then we would have to pay the rest of the 3%”.

Notably, bills are not provided for many commodities although they fall under GST, in both wholesale and retail. This way the customer spends less from their pockets, and the trader and seller continue competing.

“The amount of rice is tracked from the time we purchase them from the farmers, brought to our mills and sold to traders, so it is not possible to scuttle GST,”  Ragu of Kunduthattu Rice Mill in Madurai Told NewsClick.

“If I buy rice from Karnataka farmers, it is bought paying cess for the number of tonnes bought. Even for purchasing rice within the district, we pay Cess,” he said.

“Stored stock of rice is also tracked, and we take loans based on the amount of rice we deal with. So, everything is transparent. But we need to make an extra effort at keeping track of accounts now,” he added.

‘DIFFICULT FOR PEOPLE’

5% GST  on rice would lead to an average price hike of Rs 60 per 25kg bag which is currently sold for Rs 1,000.

“We are protesting knowing very well that people will continue buying rice and our business will not be affected. Rice is the most commonly consumed cereal in Tamil Nadu, even if it is expensive people will buy it,” Ragu told NewsClick.

He added, “yet we went protested because we know it is going to be difficult for the public. But, the public is unaware of it. If some10 tea shops are shut in a region, people will know there is a strike. But, we did a state-wide strike, but the public could not see it.” 

Packed rice now falls within the purview of the definition of ‘pre-packaged commodity’ under the Legal Metrology Act, 2009, which is ‘pre-packaged commodity’ and means “a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity”.

Tamil Nadu Vanigar Sangangalin Peramaippu has said that the federation will hold a State-wide protest on July 22 demanding a rollback of the GST on essential commodities.