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BW Businessworld

GST Is The Only Boost FMCG Sector Needs

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CEO and MD of Sharp India Ltd SK Sinha says taxation is killing the sector. Blaming the Indian state variant taxes he says the only way to elevate the stagnation in the sector is through the introduction of a simple Goods and Service Tax. The sector is said to have been one of the very few, which avoided a direct blow of the Indian economic slowdown. But even official data suggests that the industry has stagnated for almost three years now – at Rs 90,000 crore. Sinha suggests alternatives and options to help the sector in an exclusive chat with BW.

What is the biggest hurdle in the FMCG sector at present?
The tax structure. Each state, region and sometimes even districts come with their own variants of taxes and duties. This seriously slows down business and increases operations costs. At the tip of the Indian taxation iceberg are taxes like CST, VAT, LBT (which is Maharashtra’s own version of OCTROI), octroi and other entry taxes. For example, it is roughly 700 kilometres from Chennai to Kochin, which takes 10 hours by road, 12 by bus, overnight by train but when a goods consignment is travelling it is required to stop at 17 check points and it takes around 72 hours. At present the number of taxes amount to around 35 per cent MRP, this is not a conducive environment for businesses.

This is not to say that we don’t want to pay taxes – the industry is more than willing but it needs to be simplified and homogenised.

How can the new government address this?
In the upcoming budget address GST and begin work towards the speedy implementation of a Goods and Service Tax (GST). Government needs to be cautious that they do not just change the name – the mechanisms and multipoint collections etc also need to be addressed. Make taxation simpler, online, unified and borderless. With 20 per cent of the world’s population the FMCG sector in India should have doubled in the last four years, instead we have stagnated at Rs 90,000 crore in the last three years.