Edible oil ind asks Centre, states for exemption from GST

Fearing higher taxes when GST comes into effect from next fiscal, the edible oil industry has asked the Centre and states to either exempt it from the proposed levy, or refrain from hiking the rate from the present level of 4-5 per cent.

"Price sensitive essential items of mass consumption like edible oil should be treated in line with foodgrains and should be exempted or taxed at a reduced rate at par with existing tax outgo, so as to limit any inflationary trends," a memorandum from the industry said.

The fear of the Solvents Extractors' Association of India arose because currently, edible oils attracts 4-5 per cent VAT in states and is exempt from excise duty.
    
However, the Centre has proposed a minimum 12 per cent GST tax on goods, to be imposed by the Union government and the states at six per cent each.
    
In a memorandum to Finance Minister Pranab Mukherjee and Empowered Committee of State Finance Ministers Chairman Asim Dasgupta, the association said, "For a product like edible oil, the impact would be quite adverse, as currently the same is exempt from excise duty and is subjected to a VAT rate of 4-5 per cent only. In fact, in a few states like TN, Kerala, etc., VAT is zero."
    
If the effective tax rate on edible oil suddenly increases to 12 per cent, it could again revitalise the grey market for these products, which has shrunk considerably over the years. It would impose a heavy burden on consumers as well, besides the industry, the body said.
    
The association further said that edible oil is used by all stratas of the population across the country as a cooking medium.
    
"This essential commodity is highly price sensitive and any inflationary impact is immediately reflected in the Consumer Price Index, apart from a creating a problem of adulteration in the country," it added.
    
The Centre has proposed a three-tier tax structure for GST -- combined 20 per cent and 12 per cent for goods and 16 per cent for services -- to be levied in equal percentage by the states and the Centre.
    
However, states are yet to give the go-ahead to these rates. After missing the earlier deadline for rollout of the proposed tax regime this fiscal, GST is now proposed to be introduced from April 1, 2011, and will replace excise duty and service tax at the Centre's end and VAT on the states' front, besides local levies, surcharges and cess.