Indian Fertilizer Industry Faces ITC Challenges Despite GST Revisions
The Indian fertilizer sector continues to face significant issues due to input tax credit (ITC) accumulation, even after recent GST revisions. Subsidised fertiliser prices remain lower than the cost of raw materials, which causes ITC pile-ups for many Indian fertilizers manufacturers.
Fertilizer companies sell products below cost to make them affordable for farmers. Meanwhile, the GST system allows input tax credits on raw materials, but the output tax on subsidised fertilisers remains low. This mismatch locks up substantial working capital and puts pressure on operational efficiency in the Indian fertilizer sector.
Industry leaders report that billions of rupees are tied up in accumulated ITC. Vineet Jain, Managing Director of R M Phosphates & Chemicals, highlighted that several companies have around ₹3,500 crore in locked credits. He emphasized that full ITC refunds would improve cash flow and allow for capital investments.
The Federation of Indian Chambers of Commerce & Industry (FICCI) has also raised the issue with Finance Minister Nirmala Sitharaman. While GST revisions have provided partial relief, structural challenges in subsidies and tax credits continue to affect Indian fertilizer companies.
Addressing these ITC challenges is critical for the Indian fertilizer industry. Effective reforms will help companies maintain cash flow, continue supplying affordable fertilisers, and strengthen India’s agricultural productivity. Securing financial stability in the sector is essential for sustainable growth and food security across the country.
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