27.08.2022: Input tax credit on edible oil: Oil millers seek reversal of GST panel’s decision to not allow refund, writes to PM

The state body of oil millers and oilseed traders wrote to Prime Minister Narendra Modi Thursday demanding a rollback of the decision taken by Goods and Services Tax Council to not allow refund of accumulated input tax credit (ITC) on edible oils.

The GST Council’s decision has led to price inflation of edible oil and went against the government’s strategy to soften prices of oils in the country, stated Gujarat State Edible Oils and Oil Seeds Association (GSEOOSA).

Currently, oil millers purchase their raw material at 18 per cent GST but can only charge a GST of 5 per cent on their produced goods, resulting in a surplus of 13 per cent that remains with the government. The GST Council in June decided not to refund the surplus on edible oils, resulting in, according to the association, “an indirect hike” in GST on edible oils.

“It is a harsh step, totally against the principle of natural justice. We purchase our total packing materials, chemicals etc used during our production process, etc at 18 per cent GST. When we pack our products in various packing and sell in market, we charge 5 per cent GST from our buyers as per prevailing GST rates on edible oils. Due to this, all edible oil packers have huge surplus ITC. It is impossible for units to adjust the same in business transactions,” Sameer Shah, president of GSEOOSA, wrote in his letter.

“As a result, the entire edible oil industry is in trouble. At one point, it is likely that our total working capital will be locked in input tax credit and many of us will be left with no money to run our business and forced to shut our units,” he added.

“The government is facing severe flak for rising prices of essential items. Rising prices of edible oils has worried the government most. Under such circumstances, by not allowing refund of input tax credit to edible oil industry, the Central government has indirectly raised GST rates on edible oils,” the letter stated.

Shah said that packaging material and chemicals used in producing edible oils account for up 25 per cent of total production cost of edible oils.

“Theirs being MSME units, oil millers have limited capacity to adjust such disparity in GST rates on inputs and on finished products. If the government sticks to its decision of not refunding accumulated ITC, which can run into crores for individual millers, the oil millers will have no option but to recover it from consumers by increasing edible oil prices,” he said.

Source: The Indian Express
https://indianexpress.com/article/cities/rajkot/input-tax-credit-on-edible-oil-oil-millers-seek-reversal-of-gst-panels-decision-to-not-allow-refund-writes-to-pm-8114167/

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