Many food traders in India are giving up their registered trademarks to avoid the 5% GST on branded foods.
What is the crux of the issue?
GST specifies that various “barley, cereal, corn, flour, oat, pulse, rice, rye, seed and wheat” products that are sold bearing a “registered brand name” will be charged a 5% GST.
Traders feel that the 5% GST makes a huge difference in the highly competitive market.
Additionally, along with GST, the costs incurred in maintaining product quality as per government norms for branded products could be upwards of 15%.
The act defines brands as those registered under the Trade Marks Act, 1999, which has made the traders consider de-registering their products.
What are the fallouts?
There migh be a fall in quality & increased adultration due to temptations of the industry & public to go unbranded to reduce costs.
As only products registered under the Trademarks Act are taxed, this creates an anomaly, which makes it possible for some form of brand retention without tax compliance by de-registeration.
Copy cats migh be sprout up if established brands de-register.
What can be done?
As registration deters copying and provides for better quality control, the government sould take up corrective policy measures to encourage registration with the Trademarks Act.
Local agents need to reach out to affected traders and make them aware of the positives that registered trademarks bring to their business.
GST Council should hold regular meetings and outreach programmes with brand owners and other stakeholders to formulate effective policies.
For the betterment of the society at large & to eliminate anomalies, the government could also consider eliminating differential taxation for similar products.
