GST cuts on processed food can spark consumption, manufacturing and farmer incomes, govt says

After the Indian government, in the 56th meeting of the GST Council, decided to make sweeping changes to the existing GST rates, talking about its impact on the domain of processed food, the Ministry of Food Processing today said that the overhaul of rates will give a major fillip to the country's manufacturing sector.

"The food-processing sector has been a major beneficiary in this rationalization of tax rates with most products witnessing a decline to 5% GST slab. This rationalization of GST to lower levels provides a variety of stimulants to the sector and encourage a virtuous cycle of economic growth," the ministry noted.

It further outlined various ways by which economic growth would be unleashed. One of the primary ways, as per the ministry, is that the revamped GST rates, which will come into effect from September 22 onwards, will give a major boost to manufacturing.

"The lower GST rates on consumer goods and the resultant lower prices could potentially set off a virtuous cycle of increased demand and growth for the industry," the ministry noted.

It further said that this will be achieved through four primary ways, i.e., through consumption, investment, better employment opportunities, and by providing better income levels for farmers and food processors.

The ministry noted that the GST rate cuts will lead to subdued retail prices, thereby increasing consumer demand for manufactured goods, which will include processed food products.

The ministry also predicted that investment is slated to rise because of 'increased demand and positive business, sentiment and reduction in compliance burden.'

"With increased demand, expected rise in investment and formalisation of industry, more employments opportunities are expected to be generated in the sector and economy as whole," the ministry noted further.

Finally, talking about farmers, the government is of the opinion that the cumulative rise in consumption patterns in the country will lead to rise in income levels for farmers and food processors.

"The incomes and remunerations of the farmers and food processors are expected to rise by way of increase in consumption and investment in the economy, increasing the food-processing infrastructure, level of processing and value addition and reduction in post-harvest losses," the ministry said.