-Tanisha Saxena (cbedit@imaws.org)
India’s bakery industry is at a crossroads, contending with a convoluted tax structure, a widening skills gap, and sluggish technological adoption. At the forefront of these challenges is the Indian Bakers Federation (IBF), which is calling for regulatory clarity, workforce development initiatives, and a more business-friendly environment.
At a recent general body meeting, IBF leaders laid out their priorities for the upcoming financial year, with taxation reform at the top of the agenda.
A Call for Tax Reform: ‘Simplification Is Key’
“Where is the principle of ‘one nation, one tax’ in this?” asked IBF National President S. Anburajan. To address these discrepancies, the IBF is advocating for a special GST category for micro and small enterprises in the bakery industry. The proposal suggests a uniform 5% tax rate for all food products without input tax credit (ITC) or an alternative 12% rate with ITC. “Of course, keeping in mind the exempted category stays to ensure bakery always remains a necessity of daily life,” Anburajan emphasized. A simplified structure, he argued, would encourage compliance while ensuring stable government revenue.
A major frustration for the industry stems from the inconsistent classification of bakery products under the Goods and Services Tax (GST). “A pizza base, without toppings or cheese, is essentially bread. Yet, it falls under the 5% GST bracket,” explained IBF General Secretary Gaurav Dhingra. “This creates confusion. We’ve seen similar issues recently with popcorn and now with donut taxation. The inconsistency makes it difficult for businesses to plan effectively.”
Vijesh Viswanath, IBF’s vice president, echoed these concerns, pointing out that many bakery products are subject to an 18% GST—the same rate as luxury items—despite being a daily staple for millions. “Plain bread is taxed at 0%, but if you add cream to it, the tax jumps to 18%. A plain bun is exempt, but a cream-filled bun is taxed at a higher rate,” he said. “These arbitrary distinctions create confusion, making compliance difficult for small bakers who lack the legal resources of large corporations like Britannia.”
Vikram Diwadkar, IBF’s national treasurer, underscored the broader challenge. “Most bakers are small and medium-sized businesses, completely engrossed in their day-to-day activities. They often don’t engage with associations until they face a crisis. GST has been a major trigger for this. Since classification isn’t properly defined, bakers interpret the rules as per their understanding, sometimes landing in trouble.”
Beyond taxation, bureaucratic red tape adds another layer of difficulty. The Food Safety and Standards Authority of India (FSSAI) mandates annual returns, a requirement that transitioned to a digital format in 2020—at the height of the COVID-19 pandemic. Many small bakery owners, unfamiliar with the new system, failed to file their returns on time. “Now, years later, they face fines amounting to thousands or even lakhs of rupees for non-compliance during a period when their businesses were barely surviving,” Viswanath said.
“Compliance should not feel like a battle,” Dhingra added. “The goal should be to create an environment that promotes ease of doing business. Growth should be the focus, not legal disputes over taxation.”
India Bakery Expo Chairman Porkai Pandian elaborated on the challenges posed by the Goods and Services Tax (GST) for small and mid-sized bakeries. “The GST rate is a major hurdle for us,” he said. “Take Chennai, for instance, where I primarily sell bakery goods. Unlike larger food establishments with diverse offerings, we focus solely on baked items. In such a case, an 18% GST feels excessive. How can consumers be expected to absorb such a high tax rate on everyday perishable baked goods? 
“We are advocating for a reduction to at least 12% with input tax credits, which would provide some relief. Unlike corporate-backed chains, MSMEs are operating on thin margins. Government support is critical for our survival, yet we find ourselves struggling to make authorities recognize the financial strain we’re under. Running a bakery is already a challenge due to the rising costs of ingredients, labor, and rent. This tax burden only exacerbates the situation, making it increasingly difficult for us to sustain our businesses.”
Another challenge that bakers today are facing is aggregators like Swiggy and Zomato services. Pandian asserts, “We as bakers appreciate in-store purchase over online buying because in the online we are only able to put up limited items and people buy a specific item and add to cart and finish. But if people visit shops to buy food then they will see a variety and tend to buy more. This online Zomato service and Swiggy have crushed the bakery business.
A Workforce Shortage in an Expanding Industry
Beyond taxation, the bakery industry is facing a critical shortage of skilled workers. Despite the proliferation of training programs, many bakeries struggle to find employees with the expertise required in modern food production. “There is a lot of promotional rhetoric around skill-building, but not enough emphasis on real, hands-on training,” Dhingra noted.
Hospitality schools, once seen as the primary pipeline for skilled workers, are struggling to fill seats. The decline in enrollment signals a looming talent shortage that could impact not just bakeries but the entire hospitality industry.
“Baking is both an art and a science, requiring precision and expertise,” Viswanath said. “Many young people hesitate to enter the field due to a lack of structured training programs. Industry leaders recognize this gap and are working to motivate the next generation to take up baking as a viable career option.”
With an estimated 1.9 million micro, small, and medium-sized bakeries operating in India—some employing as few as seven workers, others as many as 500—the industry’s potential as an employment generator is undeniable. Yet, without targeted skill development programs, this potential risks being squandered.
Recognizing the need for skilled professionals, IBF is planning to establish training centers across the country. These centers will equip school dropouts and aspiring bakers with the necessary expertise, offering them a pathway into employment or entrepreneurship.
“The government, both at the central and state levels, is investing heavily in skill development, particularly within the MSME sector. We must leverage these opportunities to launch our training centers under the bakery association,” Anburajan explained.
The training programs, projected to last six months to a year, will be offered at minimal or no cost. Additionally, trainees will receive subsidies and travel allowances, minimizing financial barriers to entry. Graduates will have the choice of securing employment through IBF’s extensive network of state-level bakery associations or launching their businesses with government-backed funding.
Rising Ingredient Costs and a Digital Divide
The challenges for bakers don’t end with taxation and workforce shortages. The rising cost of raw materials is another major concern. The price of wheat flour has surged in recent years, but the problem extends far beyond just wheat. Global fluctuations in oil prices have driven up costs for essential ingredients such as chocolate, cocoa, and various fats—staples in bakery production.
“In the past three to four years, ingredient costs have risen by 30-40%, with some experiencing hikes of up to 100%,” Viswanath said. “For small and micro-sized bakeries, absorbing these costs is not an option, leaving them with little choice but to pass on price increases to consumers. But there is only so much the market can bear.”
Meanwhile, the slow pace of technological adoption remains a significant hurdle. While large-scale bakeries have embraced automation, smaller businesses remain hesitant. “Technology is a double-edged sword,” Dhingra noted. “It presents incredible opportunities for efficiency and growth, yet many micro-level businesses struggle with its adoption.”
However, Diwadkar pointed out that challenges differ by state. “In Maharashtra, FSSAI officers are more stringent in implementing rules, while in states like Madhya Pradesh, they tend to be more lenient,” he said. “Although we have common regulations nationwide, the problems bakers face vary state by state.”
The Road Ahead: India’s Bakers on the Global Stage
Beyond domestic challenges, IBF is focused on positioning India’s bakery industry for global competitiveness. “In Belgium, even small companies—sometimes with just 8 to 20 employees—export their products worldwide,” Dhingra said. “They operate with remarkable efficiency, not because they have vast resources, but because their regulations are streamlined.”
For IBF, the message is clear: the future of India’s bakery industry lies in simplification, standardization, and skill development. But above all, the federation emphasizes collaboration—both within the industry and with policymakers.
“This year, we are trying to reach out to all states where IBF is not present,” Diwadkar said. “Membership is one part, but more importantly, we need to connect with different bakers and understand their state-specific challenges. More participation from these areas will ultimately strengthen our overall representation.”
With plans to launch new training centers and forge international partnerships, IBF is positioning itself as both an advocate and a bridge between government regulations and industry realities. For India’s bakers, the hope is that with the right support, they can move beyond survival mode—toward a future of growth, innovation, and global reach.
