GST Council lowers tax rate on fertiliser to 5%, on tractor parts to 18%

Move could bring down the price of fertiliser as the current tax rates range from 6-8%

Ahead of peak kharif sowing and keeping in mind farmer unrest across the country, the Goods and Services Tax Council lowered the rate on fertiliser from 12 per cent to five per cent and on tractor parts from 28 per cent to 18 per cent.

The decision was taken on the eve of the mega launch of GST.

The move could bring down the price of fertiliser, as the current tax rates are six to eight per cent. Some stockists had started holding on to their inventory in anticipation of a rise in prices, leading to an artificial shortage in some parts.

"The move on fertiliser is surely positive for the industry and also farmers but the input tax credit issue needs to addressed earnestly or it will add on to our long list of unpaid bills," Satish Chander, chairman of the Fertilizer Association of India, told Business Standard.

With the earlier GST rate, retail prices could have gone up by Rs 30-120 a 50-kg bag on urea, di-ammonium phosphate (DAP) and potash in states with nil tax on soil nutrient such as Punjab, Haryana and Andhra. The industry made several representations to the fertiliser ministry for a cut in the rate, saying it would raise farmers' cost of production. The ministry had reportedly taken this up with the finance ministry, which put the proposal before the Council.

The retail price of urea, fixed by the government, is at Rs 5,360 a tonne. The prices of DAP and potash, fixed by private companies, are Rs 22,000 and Rs 11,000 a tonne, respectively.