Kerala imposes 14.5% tax on junk food

The Dollar Business Bureau

The Kerala government on Friday imposed a 14.5% 'fat tax' on burgers, pastas, pizzas, and other junk food products served in branded restaurants.

Food items, such as burgers, doughnuts, pasta, pizzas, sandwiches and tacos, sold in branded restaurants would fall under this tax category. Kerala’s fast-food chains including Domino’s, KFC, McDonald’s, Pizza Hut and Subway are expected to be hit the hardest.

With the implementation of new tax arrangements, the state government looks to meet its earlier set target of 25% and fetch Rs.61,895.62 crore revenue during the ongoing financial year. Kerala’s tax revenue growth was about 17% to Rs.53,003.42 crore during the previous financial year.  

The announcement was made by Thomas Isaac, State Finance Minister of Kerala’s newly-elected LDF government, who said the decision has also been taken to curb the consumption of junk food among the residents.

Hungary and Denmark are the two other countries who have a fat tax in place.

The successful implementation of the new tax laws could help tax revenue grow by 25%. However, after the Kerala government’s latest announcements, shares of Westlife Development and Jubilant FoodWorks fell by 7.7% and 3.63% respectively.

Isaac was presenting the first budget of the newly-elected government, and said the state government would raise the resources for capital expenditure – Rs.12,000 is expected to be the investment amount for capital expenditure to develop various infrastructure and developmental projects such as bridges, IT parks and roads - by using SEBI and RBI-approved financial measures and by floating special purpose vehicles.

He announced a liberal amount of investments in key areas such as agriculture, education and health. He also enhanced capital expenditure disbursement for the implementation of an anti-recession investment package. 

The budget proposed to develop agro parks throughout Kerala to encourage agriculture and agri-business in the state. The government has also announced Rs.500 crore for rubber price support scheme, Rs.385 crore for paddy procurement and Rs.100 crore for coconut procurement.

The state government also imposed a 5% tax on packaged basmati rice and coconut oil, while it would levy a green tax on private and public vehicles over 15 years and 10 years old.

Earlier this year, Bihar had imposed a 13.5% tax on samosas and sweets costing over Rs.500 per kg.