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Drastic mismatch of input and output GST on fertilisers

Leading to huge refunds
NEWS DESK
Islamabad
The Government is believed to be considering to charge flat 2 per cent GST on all types of fertilisers. Presently varying rates are charged on different products; e.g. 5 % on Urea, Rs 100 on a bag of DAP, Rs 168 per bag on NP, and Rs 98 per bag on CAN. In the recent past a committee was constituted by Prime Minister under Mr Sikandar Bosan, the Minister for Food Security and Research. The Committee has recommended a flat rate of 2 per cent on all fertilisers to reduce the burden on farmers. The fertiliser manufacturers had pointed out that the restructuring of output taxes was welcomed provided, it was matched by similar reductions on input side as well.
Presently, refund of over Rs. 13 Billion has piled up due to the mismatch between the input (Rs. 114 per bag) against the output (Rs. 70 per bag) @ 5% in the case of urea and a similar disparity exists in the case of other products (DAP Rs. 100 Vs Rs. 115 per bag) as well, thereby leading to a ‘piling up’ of unadjusted input GST for the fertilizer manufactures which in turn is leading to additional cash flow pressures which are being faced by the fertilizer industry.
Previously, it has been brought to the attention of concerned ministries and relevant authorities to consider aligning the fertilizer industry (for domestic sales) along the lines of the textile industry and four other sectors where there is zero percent sales tax on all industrial inputs. Alternatively, the mismatch of GST on input and output should be addressed through zero based GST on following inputs to avoid GST refunds: ​​natural gas (feed and fuel), import of LNG & supply of RLNG as feed & fuel, ​​Phosphoric Acid (for DAP), ​​Rock Phosphate (for Phosphatic fertilizers), steam and power. In order to compensate for the higher cost of production (based on RLNG), the output GST should be reduced to zero percent on fertilizers produced using RLNG, for benefit of the farmers.



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