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Fertiliser Industry Seeks GST Clarity Amid Financial Strain and Credit Woes

The Fertiliser Association of India is pushing for important clarifications on GST rules to help the struggling fertiliser industry. Their chairman explains that while recent tax cuts on raw materials have helped, a fundamental mismatch in how input and output taxes are calculated continues to cause problems. This structural issue leads to companies accumulating tax credits they cannot use, which strains their finances. The industry is now asking the Finance Ministry to step in and provide a solution, hopefully soon.

Key Points: FAI Seeks GST Clarifications to Ease Fertiliser Industry Strain

  • FAI seeks GST clarifications to reduce fertiliser costs and boost competitiveness
  • Recent reforms cut GST on key raw materials from 18% to 5%
  • Structural tax distortion persists due to subsidy-related value inversion
  • Industry requests refund mechanism for accumulated input tax credits
2 min read

FAI seeks key GST clarifications to alleviate the financial strain on the fertiliser industry

The Fertiliser Association of India requests key GST clarifications to reduce product costs and resolve persistent tax credit accumulation issues in the sector.

"The industry has repeatedly sought government intervention. We request the Finance Ministry to issue clarification... Hopefully, it should be resolved soon. - S Sankarasubramanian, FAI Chairman"

By Kaushal Verma, New Delhi, December 10

The Fertiliser Association of India (FAI) is seeking key GST clarifications to alleviate the financial strain on the fertiliser industry, S Sankarasubramanian, Chairman of the Fertiliser Association of India (FAI) told ANI today.

Speaking to ANI, Sankarasubramanian said this would reduce product costs and make fertilisers more competitive as GST-related issues are affecting phosphatic fertilisers.

The FAI Chairman, however, added that recent tax reforms have eased but not eliminated the buildup of unused tax credits.

"See, currently in phosphatic fertilisers, the output fertiliser carries 5 per cent GST and input raw materials, which were at 18 per cent corrected to 5 per cent. Despite the recent cut, the structural distortion persists due to a value inversion. The output value of fertiliser includes a subsidy component that is not subject to GST. This inversion value of the GST leads to credit accumulation for the companies."

Speaking to ANI on the sidelines of the FAI Annual Seminar 2025, Sankarasubramanian appreciated the latest changes made by the finance ministry.

"In the recent GST reforms, the finance ministry has changed the GST on key raw materials like ammonia and sulphuric acid from 18 per cent to 5 per cent. This has been helpful in reducing the credit accumulation," said the FAI Chairman.

He explained that the fundamental mismatch between input and output taxes continues to burden companies.

"The industry has repeatedly sought government intervention. We request the Finance Ministry to issue clarification, and the industry has been represented through the Department of Fertilisers to seek a refund of accumulated credit for the phosphatic fertiliser segment. Hopefully, it should be resolved soon."

- ANI

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Reader Comments

S
Sarah B
Interesting read. The complexity of GST, especially with subsidies in the mix, creates these unintended consequences. The recent reduction from 18% to 5% on inputs is a good step, but as the article says, the structural issue remains. Hope the clarification comes soon.
R
Rohit P
Finally, some clarity on why fertiliser prices are so sticky! The subsidy not being under GST creates this whole inversion problem. Government needs to streamline this. Jai Kisan! 🙏
A
Ananya R
While I appreciate the industry's concerns, I hope any solution doesn't just benefit the companies but actually translates to lower prices for the end-user—our farmers. The subsidy system itself needs a thorough review for efficiency.
M
Michael C
This is a classic case of tax policy needing fine-tuning after a major reform like GST. The finance ministry seems responsive, which is positive. Resolving this will improve the health of a strategically vital industry.
K
Karthik V
Good to see FAI raising this. The "value inversion" explanation makes sense. Locked-up capital in tax credits hurts manufacturing. Hope the DoF pushes hard for the refund. A stable policy environment is needed for 'Make in India' in fertilisers.

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