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In a first, Kerala imposes 14.5% ‘fat tax’ on junk food

The Kerala government has proposed a 14.5 per cent ‘fat tax’ on burgers, pizzas and other junk food served in branded restaurants which officials from the quick service industry termed as ‘detrimental’ to consumption while some indicated the levy may not be passed on to customers.

Fat tax on junk food, a reality in European countries such as Denmark and Hungary, looks out of place in a market barely recovering from a six-quarter back-to-back slump in eating out.

“The move is business-unfriendly. It calls out the organised, eating out sector. We cannot pass the burden entirely to consumers,” Pizza Hut managing director Unnat Varma said.

Industry estimates suggest there are 50-60 outlets of organised fast-food restaurant chains in Kerala, including global brands McDonald’s, Burger King, Pizza Hut, Domino’s Pizza and Subway.

Shares of Jubilant FoodWorks, which has the master franchise rights for US chain Domino’s Pizza and Dunkin’ Donuts, and Westlife Development, the operator of McDonald’s restaurants in the south and west, lost more than 2per centeach on the BSE on Friday. A McDonald’s India spokesperson said the company would “study the details of the budget proposals before commenting.”

“The prudence is on the customer,” said Shibu Philips, business head at Lulu Shopping Mall in Kochi, one of India’s largest malls, which houses outlets of McDonald’s, Pizza Hut, Domino’s and Burger King, amongothers.

The tax revenue is envisaged to grow at 25 per cent in the budget.

The budget promises free treatment for major diseases for the poor and needy and pension for all workers above 60.

“By imposing a tax, you are making it a little more non-affordable and more costly for the customer. Imposing (the tax) is not going to change consumption patterns.” The LDF government’s budget move is aimed at curbing consumption of junk food but may not end up doing so, industry representatives said.

“We cannot pass it on to the consumers,” said G Gopinath, president of the Approved and Classified Hotels of Kerala, which has 900 hotel members. “We have to accept it as another regular expense.

It is an additional expense and an indirect cost.” Presenting the first budget of the new government, finance minister TM Thomas Isaac said resources for capital expenditure would be raised outside the framework of the budget by floating special purpose vehicles and by making use of RBI and Sebi approved financial measures.

About Rs 12,000 crore will be the investment for capital expenditure.

Isaac announced a liberal dose of funds for key areas like agriculture, health and education and effected a hike in welfare pensions while stepping up capital expenditure outlay for the implementation of an antirecession investment package.

The budget proposes to create a separate department for women. Rooted in the election manifesto of the LDF, the budget has announced houses for all within the next five years with water supply, electricity and toilets.

The tax revenue is envisaged to grow at 25 per cent in the budget.

The budget promises free treatment for major diseases for the poor and needy and pension for all workers above 60.

To boost agriculture and agri-business, the budget proposes agro parks throughout the state, Rs 100 crore for coconut procurement, Rs 385 crore for paddy procurement and provisions for modernisation of coir sector.

The price support scheme in rubber will continue and the outlay will be increased to Rs 500 crore.

Source:http://economictimes.indiatimes.com/news/politics-and-nation/in-a-first-kerala-imposes-14-5-fat-tax-on-junk-food/articleshow/53113799.cms

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