India’s vegetable oil industry body has requested the Centre to life restrictions on tax credit refunds to improve cash flows in the sector, especially for MSMEs and domestic manufacturers.
“With refunds blocked, companies face working capital shortages and disrupted cash flows, making operations less viable, especially for MSMEs and domestic manufacturers,” the Indian Vegetable Oil Producers' Association (IVPA) said in a statement.
Under the current system, edible oil attracts 5 per cent GST, while input materials such as packaging, chemicals and processing materials are taxed at 12-18 per cent, leading to substantial accumulation of unutilised tax credits.
Until 2021-22, the edible oil industry had been receiving accumulated Input Tax Credit (ITC) refunds under the existing GST provisions before the Goods and Services Tax (GST) Council imposed restrictions in July 2022.
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The association said that higher costs due to unrecovered tax credits are passed on to consumers, potentially driving up prices and pushing lower-income buyers toward unsafe or adulterated oils.
Requesting the government to treat edible oils on par with other essential consumables like butter and ghee, which continue to receive refund benefits, the industry body said policy stability was critical for investment and reducing import dependency.
With domestic demand projected to reach 30 million tonnes by 2030-31 and the edible oil market expected to grow at 5.26 per cent annually from 2023 to 2028, the association said fair tax refund policies were essential for long-term food security.
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