Millers dodge taxman by diluting atta brand

Vijay C Roy
Tribune News Service
Chandigarh, October 10

When authorities levy taxes on flimsy pretext, businessmen find ways to circumvent it without breaking the law. A case in point is ‘atta’ (wheat flour). After GST is imposed on branded flour, local millers selling packaged flour have removed their brand names from the bags and replaced it with name of their companies to avoid the tax.

After the imposition of 5% GST on branded atta, local brands became uncompetitive compared to branded products of multinational firms such as Aashirvad, Patanjali and Shakti Bhog and local chakki atta. In order to retain the market share, local millers decided to use their company’s name on the bags in place of the brand name and logo, market experts said.

Atta bags without brand names are about Rs 6 per kg cheaper from top brands because there is zero GST on unbranded wheat products.

Approximately, 1,400 flour mills across the country are processing wheat for selling with their private labels. On an average, each unit has a processing capacity of 100-200 tonne per day. The northern states comprising Punjab, Haryana, Chandigarh, Himachal Pradesh, J&K and Delhi have nearly 200 roller flour mills. Out of this, around 150 mills used to sell their products under their own brand names.

“The imposition of 5% GST is death knell to the industry as roller flour mills have very thin margin, which is around 2%. To remain competitive, almost 95% of the mills have stopped selling their product under branded category,” Roller Flour Millers Federation of India president Sanjay Puri told The Tribune.

These units are now selling flour under unbranded category by putting company’s name. Some people have retained their brand name and logo but to get tax exemption they have to forgo the exclusivity. Thus, the packaged products will fall under the non-branded category, said Puri.

In order to remain in business, Puri balances out the two. “The brand (P Mark) was built over the years, so we do not want to forego it. We have, however, increased our sales under non-branded category where bags are printed with just company name,” he said. Earlier, the GST Council had announced zero duty on loose atta and unregistered brands.

“Many flour mills have shut down their factories due to concerns over business viability as the margins are very thin,” Haryana Roller Flour Millers Association president Umesh Sharma said.