Inverted duty structure post-GST has fertiliser industry all worked up
fertilizer industry has expressed its concerns in the wake of the GST rollout due to the inverted duty structure.
Under the new GST regime, import of key raw materials such as phosphoric acid, ammonia and sulphur attracts 18 percent GST while the final product is taxed at 5 percent. On the other hand, imported DAP (diammonium phosphate) attracts only 5 percent IGST (Integrated GST), which can be set off against the 5 percent GST on its sale in domestic market.
The impact of this on companies with captive phosphoric acid capacities (using rock phosphate for production of phosphoric acid) will be less harsh, since rock phosphate attracts a 5 percent GST.
Satish Chandra, Director General of the Fertiliser Association of India, said that the inverted duty structure has compounded the problems of the industry, which is already reeling under adverse customs duty. The GST framework would lead to large-scale closure of potash-based fertiliser-manufacturing companies and expose the country to the monopoly of international suppliers, he said.
The government, he said, should reduce the tax on input for fertiliser manufacturing to 5 per cent, which will avert the problem of having to refund unusually huge accumulated tax credits and shield the industry from a liquidity crisis.
The government should be prompt about making GST refunds and follow the norms for refunding 90 percent of the money within seven days.
The exclusion of petroleum products from GST would push up cost as the spend on natural gas will not yield any credit for set-off, said Debasish Banerjee, CFO, Smartchem Technologies.