The Food Ministry has forwarded the edible oil industry’s demand for restoration of Goods and Services Tax (GST) refunds on accumulated input tax credit (ITC) to the Finance Ministry, Food Secretary Sanjeev Chopra said on Tuesday. The matter is expected to come up before the GST Council in its next meeting.
“We have sent it to the Ministry of Finance… once the GST committee meets to work on the declaration about the reduction in the rates, I am sure they will keep that in mind. Hopefully, it may take it up in the next meeting,” Chopra told PTI.
SMEs Hit by Inverted Duty Structure
Since July 2022, edible oil producers—particularly small and medium enterprises—have been struggling with restrictions on ITC refunds arising from an inverted duty structure. While edible oils are taxed at 5% GST, inputs such as packaging, processing equipment, and chemicals attract higher slabs of 12–18%, leaving companies with large unutilized credits.
Industry associations, including the Indian Vegetable Oil Producers’ Association (IVPA), have pressed for edible oils to be treated on par with products like butter and ghee, which continue to enjoy refund benefits. They argue that restoring ITC refunds would ensure policy stability, encourage investment, improve price stability for consumers, and strengthen supply chain efficiency.
GST Rationalization Under Review
The Centre’s proposal to the Group of Ministers on GST rationalization suggests a new structure with two broad rates—5% and 18% for ‘merit’ and ‘standard’ goods—along with a 40% slab for select items. This would replace the current multi-tier system of 5%, 12%, 18%, and 28%.
New Compliance Rules for Oil Producers
Separately, Chopra confirmed that the new Vegetable Oil Products, Production and Availability Regulation Order-2025, has been rolled out to improve transparency, curb hoarding, and stabilize prices. Under the rules, all producers must register with the Directorate of Sugar and Vegetable Oils and submit monthly data on production, sales, stock levels, and purchases.
The ministry plans to hold awareness camps and facilitate on-spot registrations to bring more players on board. Currently, about 20% of producers account for nearly 90% of total output, Chopra said, noting that once major firms comply, the government will have a clearer picture of industry data.