IVPA urged the government to lift GST refund restrictions on accumulated Input Tax Credit (ITC) imposed since July 2022, citing strain on working capital and investment.
The inverted duty structure causes edible oil (5% GST) to face higher input taxes (12–18%), leading to unutilised tax credits.
IVPA said refund curbs disrupt cash flows, hit MSMEs and domestic manufacturers hardest, and increase costs passed on to consumers.
Vegetable oil industry body IVPA has urged the government to lift restrictions on tax credit refunds in place since July 2022, saying the curbs are straining working capital and deterring investment in the sector.
The Indian Vegetable Oil Producers' Association (IVPA) said the Goods and Services Tax (GST) Council's restriction on refunds of accumulated Input Tax Credit (ITC) under the inverted duty structure was causing cash flow problems, particularly for small and medium enterprises.
Under the current system, edible oil attracts 5% GST while input materials such as packaging, chemicals and processing materials are taxed at 12-18%, leading to substantial accumulation of unutilised tax credits.
"With refunds blocked, companies face working capital shortages and disrupted cash flows, making operations less viable, especially for MSMEs and domestic manufacturers," the IVPA said in a statement.
The association said that higher costs due to unrecovered tax credits are passed on to consumers, potentially driving up prices and pushing lower-income buyers toward unsafe or adulterated oils.
The edible oil industry had been receiving ITC refunds until the 2021-22 financial year under existing GST provisions before the Council imposed restrictions in July 2022.
IVPA requested the government treat edible oils on par with other essential consumables like butter and ghee, which continue to receive refund benefits, and said policy stability was critical for investment and reducing import dependency.
With domestic demand projected to reach 30 million tonnes by 2030-31 and the edible oil market expected to grow at 5.26% annually from 2023 to 2028, the association said fair tax refund policies were essential for long-term food security.
