Oilseeds will attract 5% tax under goods and services tax, unlike most other agricultural produce such as grains and pulses that have been exempted under the new regime that is set to be rolled out from July.
This has led to worry among edible oil manufacturers over locking up large funds as they will be able to only partially recover the tax they pay on inputs from the output, edible oil and de-oiled cake or DOC, a byproduct of edible oil manufacturing used as animal feed.
The primary list of GST includes oilseeds under 5% tax bracket. But of the two products manufactured after crushing oilseeds, only edible oils will attract 5% GST and DOC, the second product, has been put in the nil tax category. Oilseeds used for seed purpose have been exempted from taxation.
“When oilseeds are crushed, DOC production accounts for 70% of the output and oil accounts for 30%. Thus, of the 5% tax paid on inputs, the oilseeds, we will be able recover only about 1.5% to 2% tax from edible oil and for the remaining 3% to 3.5%, we will have to seek refund,” said Davish Jain, president, Soyabean Processors Association of India.