A Parliamentary panel has recommended that the government should propose to the GST Council to reduce tax rates on fertilisers from the current 5 per cent.

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In its report laid in Parliament on Wednesday, Standing Committee on Chemicals and Fertilizers said the committee have been informed that fertilisers were placed under the 12 per cent GST bracket. However, on demand of various states, GST on fertilisers was reduced to 5 per cent.

"The issue to further reduce GST on fertilisers was placed before the GST council in its 45th and 47th meetings held in September 2021 and June 2022, respectively. The GST council, however, did not recommend any change in the rates of fertilisers or other organic farm inputs.

"The committee strongly recommend that the issue to further reduce GST on fertilisers may be placed before the GST Council at the earliest in the best interest of the farmers of our country," it added.

The panel noted that fertilisers are levied GST at 5 per cent and its raw materials, like sulphuric acid and ammonia, are levied a higher GST at 18 per cent on the recommendations of the GST council.

"The Committee failed to understand this anomaly. The Department has clarified that the raw material of fertilisers like Sulphur has multiple uses and is also used in the production of detergents, paints, dyes etc. Similarly, ammonia too has multiple uses and is also used as refrigerator gas, manufacturing of plastics, explosives, textiles etc," the report said.

However, the committee felt that raw materials used for the production of fertilisers should be levied with lesser GST and asked the Department of Fertilizers to "consider favourably the proposal to lower the GST on raw materials in the interest of fertiliser manufacturing companies and ultimately farmers".

Among other recommendations, the panel asked the Department of Fertilizers to take all remedial measures to contain the deficit of various types of fertilisers in the country, especially urea, and make it more self-reliant.

The committee urged the government to review the present Nutrient based subsidy policy for phosphatic & potash (P&K) fertilisers in order to remove the disincentives for farmers to use other fertilisers rather than urea.

The panel's report said that over-consumption of urea is being promoted due to Nutrient-Based Subsidy (NBS) policy, which covers other fertilisers like P&K fertilisers only.

"Urea is left out of the scheme and hence it remains under price control whereas technically there is no price control in other fertilisers. The prices of the other fertilisers, which were decontrolled, have gone up and that has led farmers to use more urea than before. This has further worsened fertiliser imbalance," it added.