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What to Expect from VAT-Free Dairy Production

New Prime Minister Mamuka Bakhtade has proposed an initiative to exempt natural milk and dairy goods production from VAT payment. When delivering his speech at the parliament as PM candidate, Mamuka Bakhtadze noted that there are asymmetric regulations in agriculture sector that do not foster the sector development.

«We propose to free not only milk supply from VAT, but all products made of natural milk», Mamuka Bakhtadze noted.

These reforms will enable farmers to accumulate more incomes. Moreover, farmers will be able to sell natural milk at higher prices and receive additional incomes and this signifies dairy plants will be able to use natural milk instead of milk powder, which is imported from abroad by 100%.

The third key benefit is that our citizens will enjoy dairy products of natural milk, Bakhtadze said.

The Caucasus Business Week (CBW) has inquired what the field specialist and private sector representatives think about this initiative and what results we should expect from this new initiative.

This decision will not make dairy products expensive and domestic products will become competitive compared to imports, they noted.

Sante company director Erekle Gamkrelidze explains that domestic natural products production will become interesting in many directions after VAT removal.

«This, first of all, will boost production of primary products and processing industry. Demand for milk will rise, farmers will accumulate more incomes and consequently, they will expand their products. As to prices, we do not expect them to change, because the industry is quite flexible in this respect», Gamkrelidze said.

Nino Zambakhidze, head of Association of Farmers, agrees with Erekle Gamkrelidze’s position.

«First of all, cattle-breeding direction will be developed and similar support is genuinely positive decision. As to pricing policy, I believe that this initiative will not increase prices of dairy products», Nino Zambakhidze said.

I genuinely welcome  this initiative, because there are a lot of challenges in this sector. VAT removal will tackle many problems and will promote the field development. Moreover, valuable and healthy competition will be established on the market. It is also noteworthy that regretfully, today the ratio of natural milk in production is only 30%, while the Government’s new initiative will reduce a use of milk powder. As a result, natural milk production will also increase, Rusudan Gigashvili, head of Farmer of the Future noted.

According to Geostat, national statistics service of Georgia, in the first quarter of 2018 milk production made up 98.3 million liters, down 1.4% as compared to the same period of 2017.