Agri Business

SEA urges Govt not to hike GST on coconut oil

Our Bureau Mangaluru | Updated on September 16, 2021

Says coconut oil should be treated as edible oil and not hair oil

The Solvent Extractors’ Association (SEA) of India has said that the proposed changes to the GST rate for classification of edible coconut oil will be detrimental to the interests of coconut farmers and industry.

In a letter to the Union Finance Minister, the SEA President, Atul Chaturvedi, said that at present pure edible coconut oil is taxable at the rate of 5 per cent. “It is understood from the reports that there is a proposal to enhance the rate of tax from 5 per cent to 18 per cent on coconut oil sold in packs below 1000 ml, and the rate would continue to be 5 per cent on coconut oil sold in the packs above 1000 ml,” he said.

The proposed changes in GST for packaged coconut oil shall adversely impact not only the industry, but other stakeholders such as farmers and consumers, he said.

Edible oils

Stating that coconut oil is classified under FSSAI as edible oil, he requested the GST council, which is meeting on September 17, to treat FSSAI-licensed coconut oil at par with other edible oils.

Requesting the GST Council to have uniformity of application of GST regulations, he said all packs of coconut oil, irrespective of size, must be treated equally and continue to be taxed at uniform rate of 5 per cent applicable to edible oils.

All pure edible oils such as coconut oil, till oil, mustard oil, olive oil etc., have multiple uses, including as a cooking medium, and these oils are also packed in smaller sizes of 50 ml to 1000 ml.

Drawbacks of loose oils

Since loose edible oil is susceptible to adulteration and hoarding, and recognising the need to promote usage of branded packed edible oils, the Legal Metrology (Packaged Commodities) Rules 2011, has allowed the manufacturers to pack and sell edible oils in smaller packs of 100 ml, 175 ml, 200 ml, 250 ml, 300 ml, 500 ml, 750 ml and so on.

Levy of a higher GST rate of 18 per cent on coconut oil packs up to 1000 ml may encourage sale of loose oil which the Government has banned. It may also lead to hoarding of loose oil. Both will lead to inflation impacting weaker sections of the society that consume coconut oil, he said.

Classification of coconut oil

Various High Courts and the Supreme Court have held that pure coconut oil shall be classified as edible oil irrespective of the pack size. In fact, taking cognizance of the Supreme Court ruling, the Central Board of Excise and Customs had vide its Circular of October 12, 2015, withdrawn its earlier Circular of June 3, 2009, (wherein it had issued instructions to tax coconut oil packs up to 200 ml as hair oil). Treatment of coconut oil up to 1000 ml as hair oil will thus be inconsistent with Supreme Court rulings, Chaturvedi said.

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Pure coconut oil (similar to other edible oils) is governed by various food regulations of the country, and is subject to all quality specifications that edible oils need to meet. These regulations are applicable irrespective of the pack size. Treating coconut oil as hair oil will thus be inconsistent with those above regulations, he said.

Any increase on packaged coconut oil tax will certainly impact many small and medium scale industry establishments in this category. It would adversely affect large number of people employed in this sector in already stressed employment situation due to current pandemic, he added.

Published on September 16, 2021

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