Budget Series: Sector focus on Food and Drink
By Shubhi Mishra
A Budget with Several Tariff Changes and introducing an Agricultural, Infrastructure, and Development Cess
2021 will be a watershed year for the world, where most countries, including India, are working to recover from a deep economic recession. Like other industries, the food and drink industry had expected a higher allocation of funding for food processing schemes and tax incentives for both exports and imports of food and agricultural items.
On February 1, 2021, Indian Finance Minister Nirmala Sitharaman presented the Government of India’s Union Budget for the Fiscal Year 2021/22. With each union budget, GOI reviews the structure of import tariffs and proposes and implements changes to India’s Customs and Central Excise Board regulations and duty rates.
GOI introduced Agriculture Infrastructure Development Cess (AIDC) by offsetting a part of the Basic Customs Duty (BCD), and increased tariffs on agricultural, food, and drink products. Unquestionably, the union budget leaned towards an increased focus on infrastructural spending by introducing an AIDC on certain food and non-food items to finance the improvement of agriculture infrastructure and other development expenditures.
Major changes pertaining to the international Agri, F&D sector can be accessed from the India budget announcement, with key highlights as the introduction of AIDC on select commodities.
- Among the food and drink items, the AIDC will be imposed on alcoholic beverages (100%), crude soybean and sunflower oil (20%), apples (35%), peas (40%), and lentil allied products (20-50%)
- The new BCD and AIDC will also be applicable to the assessed value, or the Cost, Insurance, and Freight (CIF) value plus the landing charge as previously done for the BCD
- AIDC has been shared out from the existing BCD and the new BCD has been reduced by the amount apportioned to the AIDC. Making the impact value-neutral with no direct additional cost burden
- Also, the new cess is only applicable on hard spirits such as Scotch, whisky, rum, and vodka, and not on foreign beer.
- The said announcement was enforced on 2 February 2021.
- Union Budget impacted the following agricultural, food, and drink products: Apples, cotton, select pulses, vegetable oils, alcoholic beverages, and waste from the food industry/animal feed.
India Union Budget: Agricultural, Food and Drink Applicable Changes
| HS Code | Description | Old BCD (%) | Union Budget 2021 | ||
| New BCD (%) | AIDC (%) | Effective BCD +AIDC (%) | |||
| 071310 | Peas | 50 | 10 | 40 | 50 |
| 07132010 | Kabuli chana (White Chickpeas) | 40 | 10 | 30 | 40 |
| 07132020
(High BCD for U.S. origin goods) |
Bengal gram (Dark Chickpeas) | 60
70 (for U.S. origin goods) |
10 | 50 | 60 |
| 07132090
(High BCD for U.S. origin goods) |
Other Chickpeas | 60
70 (for U.S. origin goods) |
10 | 50 | 60 |
| 07134000
(High BCD for U.S. origin goods) |
Lentils | 30
50 (for U.S. origin goods) |
10
30 (for U.S. origin goods) |
20 | 30
50 (for U.S. origin goods) |
| 080810
(High BCD for U.S. origin goods) |
Apples Fresh | 50
70 (for U.S. origin goods) |
15
35 (for U.S. origin goods) |
35 | 50
70 (for U.S. origin goods) |
| 150710 | Soybean Oil and Its Fractions, Crude, Whether or Not Degummed | 35 | 15 | 20 | 35 |
| 151211 | Sunflower-Seed or Safflower Oil, And Their Fractions, Crude, Not Chemically Modified | 35 | 15 | 20 | 35 |
| 151110 | Palm Oil and Its Fractions, Crude, Not Chemically Modified | 27.5 | 15 | 17.5 | 32.5 |
| 2204 | Wine of fresh grapes, including fortified wines; grape must other than that of heading 2009 | 150 | 50 | 100 | 150 |
| 2205 | Vermouth and other wine of fresh grapes flavored with plants or aromatic substances | 150 | 50 | 100 | 150 |
| 2206 | Other fermented beverages (for example, cider, perry, mead, sake); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included | 150 | 50 | 100 | 150 |
| 2208 | Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 percent vol.; spirits, liqueurs, and other spirituous beverages | 150 | 50 | 100 | 150 |
| 2207 20 00 | Denatured ethyl alcohol (ethanol) for use in manufacture of excisable goods | 2.5 | 5 | 0 | 5 |
| 2301 10 | Flours, meal and pellets of meat and meat offal, greaves | 30 | 15 | 0 | 15 |
| 2301 20 | Flours, meal and pellets of fish, crustacean and aquatic invertebrates unfit for human consumption | 5 | 15 | 0 | 15 |
| 2302 10 | Bran, sharps and residues, Maize Bran | 0 | 15 | 0 | 15 |
| 2302 30
230250 |
Bran, sharps, and residues, of wheat and leguminous plants | 30 | 15 | 0 | 15 |
| 2303 | Residues of starch manufacture | 30 | 15 | 0 | 15 |
| 2308 | Vegetable material and waste | 30 | 15 | 0 | 15 |
| 2309 9010
23099020 23099031 23099032 |
Compound animal feed (shrimp larvae feed not included) | 30 | 15 | 0 | 15 |
| 5201 | Cotton (not carded or combed) | 0 | 5 | 5 | 10 |
| 5202 | Cotton waste (including Yarn Waste and Garneted Stock) | 0 | 10 | 0 | 10 |
