NEW DELHI: The GST Council cut the rate of tax on fertilisers to less than half of what it had previously decided, offering a major relief to farmers just ahead of the launch of the new tax system. In another decision that will help the sector, the government notified lower rate on tractor components.
Fertilisers will now be taxed at 5% under goods and services tax, down sharply from the 12% rate approved earlier. The decision came at a meeting of the council held late on Friday, hours before the midnight rollout of GST. Effective rate on fertilisers varied from 0-6% in the previous regime, depending on the state. The fertiliser industry had sought a reduction in the rate after the council initially set it at 12%. Farmers in places like Punjab had protested against the higher rate on fear of it increasing their farming cost.
“Council considered representations against 12% rate on fertiliser as some members felt that prices of the commodity could go up,” finance minister Arun Jaitley said after the GST Council meeting. “It was decided by consensus that tax rate on fertiliser should be 5% and not 12%.” This will ensure that fertiliser prices will not go up, he said.
On exclusive tractor components, the notification put the GST rate at 18%, compared with the previous decision to levy 28%. Jaitley said some rules had to be approved to ensure smooth implementation of the new tax. “Lowering fertiliser tax from 12% to 5% brings its GST rate closer to the current effective rate … industry and farmers’ voice has been heard,” said Pratik Jain, leader-indirect taxes at PwC. Meanwhile, just ahead of the rollout of GST, Prime Minister Narendra Modi met the council members after its 18th meeting for a special dinner.
GST will subsume as many as 17 taxes and 23 cesses. In line with the rollout of the new regime, the government decided to name all offices of indirect taxes GST Bhawans.