The Directorate General of GST Intelligence (DGGI) has initiated action against many fast-moving consumer goods (FMCG) companies for alleged tax fraud.
According to a report, DGGI filed notices and investigative intimation letters to FMCG businesses such as ITC, Pepsico, Prataap Snacks, Balaji Wafers, Guiltfree Industries and Sarveshwar Foods about this.
These companies are suspected of paying a reduced GST rate on “products coming under the head of — extruded snacks and fried pellet snacks,” according to a media report.
Extrusion is a typical food manufacturing procedure that includes forcing a material through a formed hole (die) to prepare it for consumption.
“In the 48th meeting of the GST Council, it was clarified that the snack pellets (such as ‘fryums’), which are manufactured through the process of extrusion, are appropriately classifiable under tariff item 1905 90 30, which covers goods with description ‘Extruded or expanded products, savoury or salted’ and thereby attract GST at the rate of 18 per cent vide S. No. 16 of Schedule-III of notification no. 1/2017-Central Tax (Rate), dated the 28 June 2017,” the notification had read.
In 2023, the finance ministry issued a circular stating that food manufactured by the extrusion technique should be subject to 18 per cent GST rather than 12 per cent.
The DGCI claims that the suspected GST evasion by FMCG firms resulted in considerable revenue losses.
“The DGGI has alleged Rs 500 crore GST evasion by ITC, Rs 300 crore by Prataap Snacks and Rs 175.89 crore by PepsiCo India…,” a report said by quoting sources.
An ITC official reportedly stated that they are unable to comment on the problem because industry-wide investigations are ongoing.
