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Jul, 14 2017

GST likely to impact profitability of branded basmati rice companies: ICRA

Earlier basmati rice was subject to value-added-tax (VAT) or was tax free in different states. However under GST, basmati rice has been included in the category of branded cereals registered in the Register of Trade Marks, that attract a levy of 5% GST.

The profitability of the organised basmati rice companies is likely to be negatively impacted as the same will be subject to 5% tax under the Goods and Services (GST) Tax regime that was implemented from July 1, 2017, said credit rating agency ICRA.

ICRA said, "Earlier basmati rice was subject to value-added-tax (VAT) or was tax free in different states. However under GST, basmati rice has been included in the category of branded cereals registered in the Register of Trade Marks, that attract a levy of 5% GST."

This is likely to put the branded players in a disadvantageous position compared to the unbranded rice segment as it would further widen the pricing gap and may result in some transition of demand from branded to unbranded basmati rice, it said.

ICRA added, "Branded basmati rice companies will see some erosion of profitability as they would look to absorb the GST impact and maintain the pricing parity with the unbranded segment." 

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