KEY PROVISIONS OF THE 2O14-2O15 UNION BUDGET :

• INR 500 Million has been allocated for the development of indigenous cattle breeds and an equal amount has been set for starting a blue revolution in inland fisheries. It has also been decided to provide for a lock-in period of eight years for use of assets in instances where deduction under Section 35 A of teh Income Tax Act has been claimed.
• Any of the following two deductions can be availed:

1. Investment allowance (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 and 31.03.2015 provided the aggregate amount of investment in new plant and machinery during the said period exceeds INR 1 Billion.
2. In order to provide a further fillip to companies engaged in manufacturing, the said benefit of an additional deduction of 15% of the cost of new plant and machinery exceeding INR 250 Million, acquired and installed during any previous year, until 31.3.2017.

• Full exemption from customs duty is being granted to de-oiled soya extract, groundnut oil cake/cake meal, sunflower oil cake/cake meal, rice bran/rice bran oil cake and palm kernel cake until 31.12.2014.
• The government has introduced several schemes to provide financial assistance in the form of grants and subsidies for the setting up and modernization of food processing units, the creation of infrastructure, support for research and development and human resource development as well as other promotional measures to encourage growth within the processed food sector.

THE NATIONAL MISSION ON FOOD PROCESSING :

• The centrally sponsored scheme provides the following:

1. Technology upgradation, establishment and modernization of the food processing industries.
2. Cold chain, value addition and preservation infrastructure for non-horticultural products.
3. The setting up, modernization and expansion of abattoirs.
4. Human resource development.
5. Promotional activities.
6. Primary processing and collection centres in rural areas.
7. The modernisation of meat shops.
8. Reefer vehicles.

• The scheme for infrastructure development includes grant of subsidies for the setting up of mega food parks and integrated cold chains.
• Project imports for food processing at concessional customs duties.
• In order to promote faster establishment of food processing industries in the country, the government provides various tax and other incentives to businesse

INCOME TAX :

Deduction of expenditure:

• These incentives are allowed for the following businesses, for the investment made in the previous year and prior to commencementof its operations.

1. Businesses permitted 100% deductions:

a) Setting up and operating a cold chain facility.
b) Setting up and operating warehousing facilities for storageof agricultural produce.

2. Businesses permitted 150% deduction, provided the taxpayer has commenced business on or after the Ist of April, 2012.

a) Beekeeping and the production of honey and beeswax.
b) The setting up and operation of a warehousing facility for thestorage of sugar.

DEDUCTION OF TAX FROM PROFIT :

• This tax incentive is available at the rate of 100% tax exemption for the first 5 years of operations. After 5 years, the rate is 25% of the profits. However, in the case of a company, the rate of tax is 30% of profits, after 5 years of operations. This benefit is available only for ten years provided that such business has commenced with effect from the 1st of April, 2001.
• This incentive is provided for new units in the business of processing, preservation and packaging of fruits or vegetables, meat and meat products, poultry, marine or dairy products. However, in the case of businesses relating to meat, meat products, poultry, marine products or dairy products, the above incentive is available to only those units who have started their production after the 1st of April, 2009.

SERVICE TAX :

Exempted activities:

• Service tax may not be levied on items contained in the negative list. These are services including processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun-drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market.

Exempted categories:

• Service tax is exempted in the following instances:

1) The construction, erection, commissioning or installation of original works pertaining to post-harvest storage infrastructure for agricultural produce, including cold storage for such purposes.
2) Mechanized food grain handling system, machinery or equipment for units processing agricultural produce as foodstuff, excluding alcoholic beverages.
3) Services provided by goods transport agencies for transportation of fruit, vegetables, eggs, milk, food grains or pulses in a goods carriage.
4) Services such as loading, unloading, packing, storage or warehousing of agricultural produce.

CUSTOMS DUTY :

• Projects for the installation of mechanized food grain handling systems and pallet racking systems in mandis (agricultural produce markets) and warehouses for food grains and sugar.
• Cold storage, cold rooms (including facilities for farm level pre-cooling) or industrial projects for the preservation, storage or processing of agricultural produce, apiaries, horticultural production, dairy, poultry, marine produce and meat.
• Consequently, all goods related to food processing, imported as partof the project, irrespective of their tariff classification, would be entitled to uniform assessment at a concessional customs duty of 5%, plus countervailing duties as applicable.

CENTRAL EXCISE DUTY :

Food Products:

• Nil excise duty in milk, milk products, vegetables, nuts & fruits – both fresh and dried.
• Against a standard excise duty of 12%, processed fruits and vegetables carries a merit rate of 2% without CENVAT or 6% with CENVAT.

Food Processing Machinery:

• All refrigeration machinery and parts used for the installation of cold storage, cold room or refrigerated vehicles for the preservation, storage, transport or processing of agricultural, apiary, horticultural and marine produce as well as dairy and poultry, are exempt from excise duty.
• Machinery for pasteurising, drying, evaporating, etc. used in the dairy sector is exempt from excise duty.