GST Ready India

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The Chocolate industry will take the biggest GST bite

May 24, 2017

The GST in India is going to be implemented from 1st July 2017. By pushing forward this biggest tax reform to the next level, GST Council has decided the tax rates of 1,211 items on 18th May in Srinagar. Total 18% indirect tax is decided for majority of the consumable items whereas the price of Gold and Beedi remain the same.

The chocolate industry in India is going to take the biggest GST bite with the highest tax rate of 28%. Chocolate products that are going to enjoy high price are chocolates, chewing gum, custard powder and waffles containing chocolates.

As per the data of market research firm called Mintel, the per capita chocolate consumption in India has grown at 7.8% between 2010 and 2015. This growth rate is continuing at 13% between 2015 and 2016. Such per capita consumption of India is tiny in comparison to the most chocolate crazy nation of the world, UK. The citizens of UK consumed 8.61 kg approximately in the year 2016!

As per the data of Euromonitor International, the value of chocolate confectionary market was around INR 11,260 crore in 2016. Therefore, the decision for keeping the chocolate products under the highest tax slab will affect the entire industry.

Indians have unlimited love and loyalty for foreign chocolate brands and as a result companies like Cadbury, Nestle, Ferrero, Mars, etc. have been dominating the Indian market for a long time. With the GST implementation, highest tax slab will be enjoyed by these foreign chocolate manufacturing companies.

The only thing that can resist these foreign chocolate companies to earn more from the Indian market is to switch our taste to domestic chocolate products. Amul is the most popular Indian chocolate brand which enjoys around 10% share in the present chocolate market of INR 1,500 crore in the country. Creating temptation for Indian chocolate brand is critical when the market is dominated by big giants like Cadbury, Swiss, and Belgium chocolates. There is discussion on India reducing the import of Swiss chocolate products under the free trade agreement with European Free Trade Association (EFTA), but this has been in discussions for a while.

The Indian government imports more than half of its cocoa bean requirements to meet the huge demand of cocoa. There are some major challenges for Indian farmers to grow cocoa beans in the fields. One such big challenge is the grass root chocolate market model, which is more of farmer to farmer oriented. There is a huge gap in getting knowledge from research institutes and implement them on the field for the farmers. Products like cocoa beans need training and knowledge to grow according to current industry standards. Instead of fulfilling this gap and inspire the farmers to grow cocoa beans, the Indian government is seriously relying on import.

Chocolate industry has the highest tax slab among 5, 12, 18 or 28 percent tax brackets decided by the GST council for all the consumable goods and services in India. The price of chocolate-based products is going to increase with this industry growing and catering to the unbound demands of the consumers. With such vast changes, GST is going to create a mix feeling among the chocolate lovers. Let’s watch the game and consumer reaction from 1st July.

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