GST on Fertilisers: What May Change?
The GST Council is likely to consider a proposal to levy a uniform 12% GST on fertilisers and their inputs in its upcoming meetings. This move aims to simplify tax credit chains, reduce accumulation of ITC, and make fertilisers more affordable and compliant across the supply chain.
Currently, the inverted duty structure in fertiliser supply causes cost pressure on manufacturers and subsidy burden on the government.
Current GST Structure on Fertilisers (As of Aug 2025)
| Item Type | GST Rate | Notes |
|---|---|---|
| Finished fertilisers (e.g., Urea, DAP) | 5% | Subsidised by government |
| Fertiliser raw materials (e.g., ammonia, phosphoric acid) | 12%/18% | Causes inverted tax credit issues |
| Transportation of fertilisers | 5% | With ITC (if via GTA) |
Proposed Change: Uniform 12% GST on Fertilisers
The fitment committee is examining the feasibility of aligning GST rates at 12% for both finished fertilisers and inputs.
Expected Benefits:
- Eliminates inverted duty complications
- Simplifies credit utilisation for manufacturers
- Reduces blocked working capital
- May lower dependence on government subsidies
- Improves ease of compliance for fertiliser companies
Legal Angle: Why This Is Under Consideration
The current structure violates the input-output credit chain, causing accumulated ITC under Section 54(3) of the CGST Act, 2017. Fertiliser companies often file for refunds of unutilised ITC, leading to:
- Delay in refunds
- Working capital issues
- Higher cost of production
CBIC has issued multiple clarifications over the years, but a uniform rate would resolve the problem at source.
Expert View
“A single GST rate for fertilisers and inputs will plug the compliance gap, ease subsidy distribution, and enhance domestic production efficiency.”
— Tax Consultant, Efiletax
What to Expect Next
- Fitment committee to finalise its recommendation by September 2025
- GST Council to review and decide in its next scheduled meeting
- Likely implementation from Q4 FY2025–26, if approved
What Businesses Should Do Now
- Track developments from the CBIC and GST Council
- Rework pricing models assuming a 12% flat rate
- Plan for input tax credit restructuring
- Watch out for related notification or circular updates
Internal Link
Explore how GST Amnesty Scheme 2025 impacts manufacturers — Read now on Efiletax
External Link
Refer to the GST Council website for official press releases:
https://www.gstcouncil.gov.in
Summary
GST Council may soon fix a uniform 12% GST rate on fertilisers and inputs to address the inverted duty structure, ease ITC refunds, and improve supply chain efficiency.
FAQs
Q1. What is the current GST rate on fertilisers in India?
5% GST is applicable on most subsidised fertilisers, while raw materials are taxed at 12–18%.
Q2. Why is a uniform 12% rate being proposed?
To correct the inverted duty structure and reduce input tax credit blockage.
Q3. When is the new GST rate expected?
The Council may decide by September 2025; rollout could follow in late FY 2025–26.
Q4. Will this change increase fertiliser prices?
Not necessarily — rationalisation may reduce backend costs and dependency on subsidies.