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The Indian Vegetable Oil Producers’ Association (IVPA) has welcomed Prime Minister Narendra Modi’s announcement on next-generation GST reforms and urged the Government and GST Council to expeditiously resolve the issue of accumulated tax refunds under the inverted duty structure to support MSMEs and local manufacturers.
In a media statement, the IVPA stated that since July 2022, the GST Council has restricted the refund of accumulated Input Tax Credit (ITC) under the inverted duty structure (IDS). The association has urged the government to lift this restriction.
Edible oil taxed at 5%, inputs at 12–18% GST
While edible oil is taxed at 5 per cent GST, most input materials such as packaging, chemicals, and processing materials attract GST at 12-18 per cent, leading to substantial accumulation of unutilised ITC.
It is causing strain on working capital and disincentivising the industry to invest, IVPA said.
With refunds blocked, companies face working capital shortages and disrupted cash flows, making operations less viable, especially for MSMEs and domestic manufacturers. Blocking refunds also undermines future investment in capacity, modernisation, and import substitution, the statement said.
Flagging the concern of inflation and health risk, the association said that higher costs due to unrecovered ITC are passed on to consumers, potentially pushing prices upward and may drive lower-income consumers toward unsafe, adulterated, or reused edible oils. See more.
Source: Online/OFA
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