Fertilizer stocks fly high on GST cut

By Times Of India on 04 Jul 2017 | read
Mumbai: Most fertilizer stocks rallied sharply in Monday's strong market after the industry received a boost from a sharp cut in the GST rate hours before the new tax regime was launched on July 1. From an earlier published 12%, the final GST rate on fertilizers was cut by more than half to 5%. The move is being seen as a big boost to the vast agri sector in the country as well as for manufacturers as a drop in price will increase demand. At close of Monday's trade, the stock price of Gujarat State Fertilizers closed nearly 7% up at Rs 122, while Coromandel International, one of the largest players in the sector, closed more than 3% up at Rs 431. The government-owned Rashtriya Chemicals & Fertilizers (RCF), however, ended just a marginal 0.3% higher because of the close of divestment on Friday, which increased the supply of its shares in the market. tnnThrough RCF's divestment, the government sold about 2.75 crore shares, or 5% of the company's equity, to garner around Rs 200 crore.

In a report on Monday, ratings major ICRA said that the GST Council's last minute reduction of rate on fertilizers was a positive step for the farmer community. "With the new tax rate being lower than the around 6% taxation prevailing in a majority of states, fertilizer retail prices should see a marginal reduction and should benefit farmers," the report said.

However, it pointed out that in a few states like Haryana, Punjab and Andhra Pradesh where fertilizer sales were exempt from VAT and thus tax incidence was only 1% excise duty, this industry will face increased tax incidence of 5%. As a result, fertilizer prices will see an upward movement in these states.