Edible Oil Sector Seeks Relief As Govt Considers Removing GST ITC Restrictions
India’s food ministry has asked the finance ministry to lift GST refund restrictions on vegetable oil, hoping the GST Council will address it soon. Since July 2022, producers have faced blocked Input Tax Credit under an inverted duty structure. New rules also mandate registration, monthly reporting, and awareness drives to improve transparency.
The food ministry has forwarded the vegetable oil industry’s request to the finance ministry, seeking to lift tax refund restrictions with hopes that the GST Council will consider the issue at its next meeting, Food Secretary Sanjeev Chopra said on Tuesday.
“We have sent it to the Ministry of Finance…once this GST committee meets to work on the declaration about reduction in the rates. I am sure they will keep that in mind. Hopefully, it may take up in the next meeting,” Chopra told PTI.
The edible oil industry has been grappling with restrictions on Goods and Services Tax (GST) refunds for accumulated Input Tax Credit (ITC) under the inverted duty structure since July 2022, particularly impacting small and medium enterprises and domestic manufacturers.
Edible oils face a 5 per cent GST rate while input materials, including packaging, chemicals and processing equipment, attract higher rates of 12-18 per cent. This rate disparity previously allowed the industry to claim refunds on accumulated ITC until fiscal 2021-22.
The GST Council’s July 2022 restriction on accumulated ITC refunds has left companies with substantial unutilised tax credits.
The Centre has proposed to the Group of Ministers on GST rate rationalisation a 2-tier rate structure of 5 and 18 per cent for ‘merit’ and ‘standard’ goods and services, and a 40 per cent rate for 5-7 goods. The proposal entails doing away with the current 12 and 28 per cent tax slabs.
The Indian Vegetable Oil Producers’ Association and other industry bodies have urged the government to remove refund restrictions and treat edible oils similarly to butter and ghee, which retain refund benefits.
Industry groups argue that restoring ITC refunds would ensure policy stability, boost investment, enhance economic viability, maintain consumer price stability and promote safer consumption.
On implementation of new vegetable oil regulations under the Vegetable Oil Products, Production and Availability Regulation Order, 2025, Chopra said the rules aim to boost transparency, curb hoarding and stabilise prices.
All vegetable oil producers must now register with the Directorate of Sugar and Vegetable Oils and submit monthly reports on production, sales, stock levels and purchases by the 15th of each month.
“Reporting data will take time, and it is not happening on a large scale due to a lack of awareness,” Chopra said.
The ministry plans awareness camps at key locations with the presence of concentrated edible oil industry stakeholders to facilitate on-spot registration over the next few months.
“We can do the registration on the spot and create more awareness. This will help us get to a point where we have all the data available to make decisions. Right now, we do not have any data at all. We are basically relying on the association to feed us the data,” he added.
Chopra noted that about 20 per cent of industry players generate 80-90 per cent of total production. “Once major players come on board, then we will have a fair figure; it may not be very accurate to the last decimal point, but you can have a fair idea about production, imports and stock position”.
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Source : ABP Live
