New Delhi: Traders' body CAIT on Wednesday appealed to Prime Minister Narendra Modi for a reduction in the 28 per cent GST rate levied on health and nutritional drinks and supplements, arguing that these are items of mass consumption.


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"The government has demonstrated its intent to target malnutrition through the recently released National Nutrition Strategy, being steered by the Niti Aayog.


"Hence, any high rate of taxation runs contrary to the stated public policy objectives of your government besides making it unaffordable and hurts the business of the trading community," CAIT said in a letter to the prime minister, pleading with him to correct the anomaly at the earliest.


The Confederation of All India Traders (CAIT) contended that the GST triggered price spike may push these products out of the price reach of the common man and exacerbate India's malnutrition and hunger problem which has already reached endemic proportions. It argued that high tax rates adversely affect the business of small traders in the supply chain.


"Therefore, in a country which has malnutrition as a major scourge, these are powerful arguments which hopefully Sir, you would take on board and ensure their affordability through the application of lower GST slabs," CAIT said while addressing the Prime Minister in the letter.


Besides, it said, given the complexity of the exercise involving compliance with the Goods and Services Tax (GST), "there must be a dynamic review mechanism to ensure that inadvertent flaws in the system are ironed out".


In the letter, the traders' body also drew the prime minister's attention to findings of a chief economic advisor- led study conducted recently before the implementation of GST.


"The study which had deliberated on the revenue neutral rate for GST strongly recommended keeping essential food items out of its ambit. The report goes so far as to say that food such as cereals, pulses, edible oils and vegetables should be construed as merit items and should be either exempt or should be taxed at concessional and lower rates," CAIT said.


It observed that a GST triggered price spike may risk putting small traders out of business through reduction in the demand for health and nutritional drinks and supplements.


"From a technical point of view there seems to be a roadblock which am sure the GST Council will do well to revisit and address. The issue stems from the fact that at present there is no specific HSN code for cereal and malt based health food drinks which are as of now classified under 1909 10 10 to be taxed at 28 per cent," CAIT said.


The traders' body contended that there is a merit in expanding the 1901 10 definition to accommodate items such as 'health food drinks' to be marked out for a lower rate of taxation.