Budget 2012: Excise duty increased for food sector, makes packaged food products and ready-to-eat products costlier

The Budget has not entirely been a sumptuous one for the food sector. Apart from a few sops announced on R&D and agriculture that benefit the industry, consumers will have to digest an across-the-board excise duty increase, making packaged food products and ready-to-eat products costlier.

The divisional chief executive (foods) of ITC, Chitranjan Dar, said that there will be an impact across all food categories. “We are now assessing the actual impact,” he said. Dar said processed food products like biscuits used to attract different excise duties at 5% and 10%. Both have gone up by 1% and 2%, respectively .

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“The hike in excise, service tax and transportation will have an impact on prices. However, benefits to farmers and on agriculture will be positive for the sector,” said RS Sodhi, MD, Gujarat Cooperative Milk Marketing Federation.

Reduction in basic customs duty on probiotics from 10% to 5% would benefit the likes of Amul. However, the increase in excise duty on icecream and flavoured milk from 1% to 2% at the onset of the summer season may not augur well for the largest maker of ice-cream.

Dinesh Shahra, managing director, Ruchi Soya Industries , said benefits from reduction in excise duty on soya food products to 6% will be passed down to consumers.