The Hindu Business Line - - FRONT PAGE -

The in­verted duty struc­ture on the fer­tiliser in­dus­try in the wake of the GST roll­out has ren­dered the in­dus­try a fer­tile ground for a bit of dis­af­fec­tion.

Indica­tively, un­der the new GST regime, im­port of key raw ma­te­ri­als such as phos­phoric acid, am­mo­nia and sul­phur at­tracts 18 per cent GST while the fi­nal prod­uct is taxed at 5 per cent.

On the other hand, im­ported DAP (di­ammo­nium phos­phate) at­tracts only 5 per cent IGST (In­te­grated GST), which can be set off against the 5 per cent 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 GST of only 5 per cent.

Satish Chan­dra, Director Gen­eral of the Fer­tiliser As­so­ci­a­tion of In­dia, said the in­verted duty struc­ture has com­pounded the prob­lems of the in­dus­try, which is al­ready reel­ing un­der ad­verse Cus­toms duty. The GST frame­work, he said, would lead to large-scale clo­sure of potash-based fer­tiliser-man­u­fac­tur­ing com­pa­nies and ex­pose the coun­try to the monopoly of in­ter­na­tional sup­pli­ers.

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.

This apart, he said, the gov­ern­ment should be prompt about mak­ing GST re­funds and fol­low the norms for re­fund­ing 90 per cent of the money within seven days.

De­ba­sish Ban­er­jee, CFO, Smartchem Tech­nolo­gies, the wholly owned sub­sidiary of Deepak Fer­tilis­ers and Petro­chem­i­cals, said that though the GST roll­out has been smooth, the 90-day dead­line for re­fund of GST credit would im­pact work­ing cap­i­tal re­quire­ments and strain the in­dus­try, which is work­ing on thin mar­gins.

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, he said.

At the con­sumer end, the im­pact of GST is sink­ing in. Although the GST rates are lower than the 6 per cent levied on fer­tiliser by a few States in the ear­lier regime, it will have an ad­verse im­pact on States such as Pun­jab, Haryana and Tamil Nadu, which had com­pletely ex­empted tax on fer­tilis­ers.

Un­der the new GST regime, im­port of key raw ma­te­ri­als such as phos­phoric acid, am­mo­nia and sul­phur at­tracts 18% GST while the fi­nal prod­uct is taxed at 5% VM MANINATHAN

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