India’s Edible Oil Industry Seeks Relief on GST Refunds as PM Modi Announces Reform Push
24 August 2025, New Delhi: The Indian Vegetable Oil Producers’ Association (IVPA) has welcomed Prime Minister Narendra Modi’s announcement on next-generation GST reforms, while pressing for the resolution of a long-pending issue on refunds under the inverted duty structure (IDS).
In his Independence Day address, the Prime Minister had said that a new round of GST reforms will be unveiled around Diwali, promising tax relief for essential goods, MSMEs, and local manufacturers.
IVPA, which represents India’s edible oil refining industry, said the reforms must also address the restriction imposed in July 2022 on refund of accumulated Input Tax Credit (ITC) under the IDS mechanism. While edible oils attract 5% GST, most input materials such as packaging, chemicals, and processing aids fall under higher slabs of 12–18%. This leads to significant unutilized credit, straining the working capital of refiners, particularly MSMEs.
“With refunds blocked, companies are facing working capital shortages and disrupted cash flows, making operations less viable—especially for smaller domestic manufacturers,” IVPA noted in its memorandum to the Revenue Secretary. “Blocking refunds also undermines future investment in capacity, modernization, and import substitution.”
The association also flagged the risk of inflation and health hazards, warning that unrecovered tax costs push up prices and may force lower-income consumers toward unsafe or adulterated edible oils.
IVPA pointed out that until 2022, the industry had been receiving ITC refunds as per Section 54(3) of the CGST Act and Rule 89(5) of the CGST Rules. The reversal of this benefit, it argued, has disrupted policy stability. The body has requested that edible oils be given parity with other essential consumables like butter and ghee, which continue to enjoy refund benefits.
“Global best practices endorse refund of accumulated ITC to improve industry competitiveness, maintain healthy cash flows, and support domestic value addition,” IVPA said, urging the GST Council to rescind the 2022 restriction.
The association stressed that restoring ITC refunds would not only strengthen industry viability and attract investment but also help moderate consumer prices and improve nutrition outcomes.
With India’s edible oil demand projected to reach 30 million tonnes by 2030–31, and the sector expected to grow at over 5% annually, IVPA underlined that fair and efficient tax policies are essential to reduce import dependency and secure long-term food and economic security.
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