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Fiscal Incentives for Food Processing Sector
Various fiscal incentives are provided by the Government of India for promoting investment in the Food
Processing sector. Some of the key incentives are outlined below:
Profit-linked tax holiday under section 80-IB of the Income tax Act 1961:
Section 80-IB of the Income-tax Act, 1961 provides a deduction for profits and gains derived by eligible
businesses. One of the eligible businesses is business of processing, preservation and packaging of
fruits, vegetables, meat, meat products, poultry, marine, dairy products or the integrated business of
handling, storage and transportation of food grains.
To avail the benefit of this tax deduction, the above-defined eligible business should have commenced
business on or after the following dates:
- Processing, preservation and packaging of fruits and vegetables, or integrated business of handling,
storage and transportation of food grains: 1 April 2001
- Processing, preservation and packaging of meat, meat products, poultry, marine or dairy products: 1
Investment-linked deduction under section 35-AD of the Income-tax Act, 1961:
Section 35-AD of the Income-tax Act, 1961 provides an investment-linked deduction for capital
expenditure incurred wholly and exclusively for the purpose of ‘specified businesses’. Depending on the
specified business for which the capital expenditure is incurred, deduction of 100% or weighted deduction
of 150% is available under this section. Some of the relevant specified businesses, alongwith the
deduction available for capital expenditure under this section is given below:
Where an investment-linked deduction is claimed and allowed under this section, one would not be
permitted to also claim an income-linked deduction (such as that under section 80-IB of the Act).
Tax holiday under section 10AA of the Income-tax Act, 1961:
As per section 10AA of the Income-tax Act, 1961, units that have been set up in an SEZ prior to
1 April 2021, engaged in the manufacture or production of any article or thing, shall be eligible for
the following deductions for profits and gains derived:
- First five years (beginning in the year in which the undertaking commences manufacturing/
production): 100% deduction of profits derived from exports
- Next five years: 50% of profits and gains derived from exports
- Next five years: 50% of profits derived, subject to the deduction amount being debited to a “Special
Economic Zone Re-investment Account” and used for certain specified purposes (such as purchase
of plant and machinery).
Goods and Services Tax (GST)
GST, an indirect tax introduced in India on 1 July 2017, is applicable throughout the country. It has
subsumed within itself the multiple cascading taxes levied by the Central and State Governments.
Under GST, goods and services are taxed at the rates of 0%(Nil), 5%, 12% ,18% and 28%.
Ministry of Food Processing and Industries (MoFPI) has under taken several initiatives for the
development of Food Processing sector, including streamlining rates for products under GST regime. The
web-link below highlights various applicable rates.
Project Import Scheme
The Project Imports Scheme is a scheme under the Indian customs law under which goods imported for the purpose of setting-up of industrial projects orsubstantial expansion of an existingindustrial project are eligible for a single rateof concessional basic customs.
Import of goods under this scheme helps facilitate smooth and quickassessment through a simplified
process of classification and valuation,and by placing the goods imported under a single tariff classification code.
Projects eligible for concessional customs duty rates under this schemeinclude industrial plants, irrigation
projects and power projects amongothers.
MoFPI has been designated as the sponsoring authority under this scheme for projects including industrial projects for preservation,storage or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine produce and meat, as well as cold storageand cold room projects.