AgriNation News Network

New Delhi/ 23 January 2018

THE  GST Council’s decision to cut tax rates on drip-irrigation systems and mechanical sprays will help farmers, rating agency ICRA said on Monday. But benefits accruing to fertiliser industry from the reduction of tax on fertiliser-grade phosphoric acid would only be marginal, it added.

The council, at its meeting on January 18, decided to reduce GST rates on drip-irrigation systems, mechanical sprays and phosphoric acid from the earlier 18 per cent to 12 per cent. The GST Council has also cut the tax rate on bio-pesticides from 18 per cent to 12 per cent.

“The reduction in the tax rates on drip-irrigation systems reiterates the focus of the government to promote irrigation facilities for the farm sector. The decline in tax rate on bio-pesticides is in line with the Government’s intent to promote the use of these products through various government schemes and should encourage farmers to use these products as an alternative to the chemical pesticides,” said K Ravichandran senior vice-president and group head, corporate ratings at ICRA, in the statement.

While the tax rate cut on phosphoric acid would help fertiliser industry in terms of lower input tax credits resulting in lower working capital blockage, delay in reimbursement of the input tax credits adds to the strain in the liquidity position of the industry that is already impacted by delay in receipt of subsidies from the government, ICRA said.

However, while the industry was expecting the tax rate on both ammonia and phosphoric acid to be reduced to 5 per cent to resolve the issue of inverted duty structure, no change in the tax rate on ammonia and 12 per cent tax rate on phosphoric acid will continue to result in large unused input tax credits for the industry and associated liquidity issues, he said.