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 CodeDescriptionOld BCD      (%)Union Budget 2021
New BCD     (%)AIDC           (%)Effective BCD +AIDC (%)
071310Peas50104050
07132010Kabuli chana (White Chickpeas)40103040
07132020

(High BCD for U.S. origin goods)

Bengal gram (Dark Chickpeas)60

70 (for U.S. origin goods)

105060
07132090

(High BCD for U.S. origin goods)

Other Chickpeas60

70 (for U.S. origin goods)

105060
07134000

(High BCD for U.S. origin goods)

Lentils30

50 (for U.S. origin goods)

10

30 (for U.S. origin goods)

2030

50 (for U.S. origin goods)

080810

(High BCD for U.S. origin goods)

Apples Fresh50

70 (for U.S. origin goods)

15

35 (for U.S. origin goods)

3550

70 (for U.S. origin goods)

150710Soybean Oil and Its Fractions, Crude, Whether or Not Degummed35152035
151211Sunflower-Seed or Safflower Oil, And Their Fractions, Crude, Not Chemically Modified35152035
151110Palm Oil and Its Fractions, Crude, Not Chemically Modified27.51517.532.5
2204Wine of fresh grapes, including fortified wines; grape must other than that of heading 200915050100150
2205Vermouth and other wine of fresh grapes flavored with plants or aromatic substances15050100150
2206Other 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 included15050100150
2208Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 percent vol.; spirits, liqueurs, and other spirituous beverages15050100150
2207 20 00Denatured ethyl alcohol (ethanol) for use in manufacture of excisable goods2.5505
2301 10Flours, meal and pellets of meat and meat offal, greaves3015015
2301 20Flours, meal and pellets of fish, crustacean and aquatic invertebrates unfit for human consumption515015
2302 10Bran, sharps and residues, Maize Bran015015
2302 30

230250

Bran, sharps, and residues, of wheat and leguminous plants3015015
2303Residues of starch manufacture3015015
2308Vegetable material and waste3015015
2309 9010

23099020

23099031

23099032

Compound animal feed (shrimp larvae feed not included)3015015
5201Cotton (not carded or combed)05510
5202Cotton waste (including Yarn Waste and Garneted Stock)010010

 


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