Government lowers GST on fertilisers just ahead of launch

By Times Of India on 02 Jul 2017 | read
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The GST Council on Friday, hours before launching the landmark tax reform, decided to lower the tax rate on fertilisers to 5 per cent from 12 per cent decided earlier, to ensure that their prices do not rise and farmers' interests are protected.

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"12 per cent rate of GST (on fertilisers) some felt it may increase burden on farmers, so the consensus within the Council was to bring the rate down to 5 per cent," Union Finance Minister Arun Jaitley who chairs the GST Council announced after Friday's meeting at New Delhi's Vigyan Bhavan.

At present, taxes on fertilisers are in the range of 0-6 per cent across states. A 12 per cent GST rate could have seen retail prices going up by Rs 30 to Rs 120 per bag (50kg) on urea, diammonium phosphate (DAP) and potash, in states like Punjab, Haryana, Andhra Pradesh, where there is zero tax on soil nutrients.

The reduced GST rate will bring down burden on farmers by Rs 1,261 crore, Chemicals and Fertilisers Minister Ananth Kumar said.

The industry had made several appeals to the fertilizer ministry to revise the GST rate to protect the interest of farmers. They had argued that such a high tax rate would see their production costs shoot up significantly affecting farmers adversely.

"Lowering fertiliser from 12 to 5 per cent brings its GST rate closer to the current effective rate...industry and farmer's voice has been heard," PwC India's ‎Partner and National Leader - Indirect Tax, Pratik Jain said on micro-blogging site Twitter post the announcement.

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The government wants to double the income of farmers by 2022.

The GST launch will happen exactly at midnight of Friday and Saturday when the switchover to the new regime takes place. Interestingly, independent India's first Prime Minister Jawaharlal Nehru had delivered his independence speech "Tryst with Destiny" at the Parliament towards midnight of August 14th and 15th in 1947.

GST, touted as the single biggest tax reform since India's independence in 1947 is expected to add 2 per cent to the country's GDP (gross domestic product). The ambitious tax reform will subsume around a dozen central and state taxes that are levied on goods and services.

(With PTI inputs)