According to industry sources, products like cookies, cream rolls, pastries, and cakes, which carried 5% VAT are now charged 18% GST, which means that the end consumer will have to pay more
Soon most bakery items will get costlier as bakers in the state are contemplating hiking prices of their products. They claim that the materials used for making most bakery products have become costlier after the Goods and Services Tax (GST) is levied on them. Also, many bakery items that were exempt from taxes earlier, have been subjected to tax resulting in higher cost for the end consumers, they say.
According to industry sources, products like cookies, cream rolls, pastries, and cakes, which carried 5 per cent Value Added Tax (VAT) are now charged 18 per cent GST, which means that the end consumer will have to pay more. While bread continues to be exempted, pizza base and toast have been charged 5 per cent GST.
Ingredients like improver (used to enhance the longitivity of the product) and yeast, used in making bread, now carry 18 per cent GST, which will force a price hike in bread. "As bread have been exempted from GST, we will not be able to get the Input Tax Credit (ITC) on the raw materials. We have represented our case to the GST Council. If taxes are not reduced, we will be forced to hike the prices. We are awaiting a response from the government," said Mohammad Hussain Shaikh, partner of Italian Bakery in Ahmedabad and president of The Gujarat State Bakers' Federation. He foresees a hike of about 10-15 per cent in next few days.
Another bone of contention is the VAT that still continues on petroleum items. Bakers use diesel and natural gas as fuel. There is a feeling in a segment that bakers will not get ITC on the fuel used. "This will be a big setback for the industry, particularly for the smaller players as margin are not very huge in the sector. There is no option but to raise prices," said Atul Vekariya, president of Surat Bakers Association, which has over 75 bakeries as members. Surat has over 400 bakeries.
"Many items that were not taxed earlier are now being taxed. For example tax on khari biscuit has risen to 18 per cent from 5 per cent. So about 10 per cent price hike is likely. We will take stock of the situation and decide accordingly," said Narendra Somani, founder and chairman of Bhagwati Banquets and Hotels Ltd, which operates TGB bakeries.
However, Axat Vyas, a tax practitioner feels that as a matter of principle, the costs in GST should come down and bakers should consult tax advisors to rework their costing which will give them a better idea of costs.
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