Dual GST rate on rice bran hits oil extraction units

Vijay C Roy

Tribune News Service

Chandigarh, November 22

The dual GST rate on rice bran is likely to hit over 350 rice bran oil extraction units, including over 100 in Punjab and Haryana. The industry fears that if corrective steps are not taken it may be diverted to other sources where there is nil tax. This will affect the capacity utilisation of oil extraction units, thereby affecting the consumption of rice bran oil which is growing at a healthy rate.

The increase in domestic demand is mainly attributed to increase in awareness of the health benefits of rice bran oil.

Currently, there is a dual rate of GST on rice bran — nil if it is used as a feed in idiary, poultry and fisheries industry and 5% if it is used for extraction of oils. According to the industry, due to the dual rates, there are chances of tax evasion besides diversion of raw material to other industries.

AR Sharma, Chairman, Ricela Group, “The dual rate is creating confusion. Firstly, it is difficult to ascertain whether the rice bran will be used as a cattle feed or in oil extraction units. Normally, it is purchased by traders from rice processing units and then oil units buy it from them. So there are likely to be cases of tax evasion. Secondly, since there is nil tax if it is used as cattle feed, the industry fears a lot of raw material will be diverted to other sources.”