In a last-minute move, govt reduces tax on fertilisers and tractor parts

Just hours before the transition, the GST Council decided to give some relief to farmers by reducing the tax on fertilisers from 12% to 5% and on tractor parts from 28% to 18%.

Since the announcement of rates, the fertiliser industry had expressed its disappointment and made several representations before the finance and fertiliser ministries.

In the pre-GST era, taxes on fertiliser ranged from 0%-6% across states — a 12% rate would have made fertilisers costlier.

The retail price of urea, which is fixed by the government, stands at ₹5,360 per tonne now. The prices of DAP and potash, fixed by private companies, are at ₹22,000 and ₹11,000 per tonne respectively.

Fertiliser dealers and farmers had protested in parts of Punjab over the past few days against the GST rates. Tractor manufacturers had also appealed to the government to reduce the tax to 18% on components. An industry association had also presented its case before the GST Council, citing an increase in tractor parts unless the tax on components is reduced.

Several state representatives on Friday brought up the issue of fertilisers, leading the GST Council to the decision to reduce the tax rate on it.

“Consensus in the Council was to bring the rate down to 5% so that fertiliser price does not go up,” said finance minister Arun Jaitley at the end of the 18th GST Council meeting in New Delhi.

Chaired by Jaitley, with state ministers and bureaucrats as members, the Council is the highest decision-making body for the new indirect tax.

The decision to lower taxes on fertilisers comes at a time when anger among farmers has grown across several states over dwindling crop income largely because of a supply glut and a cash crunch triggered by the government’s demonetisation move last November.

This year, four states have announced financial bailouts to assuage farm distress that has seen dozens of farmers kill themselves after failing to repay crop loans.

The GST has four tax slabs from 5% to 28%, with cess applicable on certain sin and luxury products such as aerated drinks and luxury cars.

The new indirect tax kicked in from the midnight of June 30. The government has time and again assured that tax rates can be tweaked even after the implementation of GST. Such decisions will be taken by the Council, which will meet on the first Saturday of every month for the first three months of the new tax being implemented.