Vegetable Oil Producers Seek End to Tax Credit Curbs

In August 2025, the Indian Vegetable Oil Producers' Association (IVPA) is calling on the government to remove restrictions on tax credit refunds that were put in place last July. The association argues that these curbs are creating financial strain and discouraging investment within the vegetable oil sector.

According to the IVPA, the Goods and Services Tax (GST) Council's decision to limit refunds of accumulated Input Tax Credit (ITC) under the inverted duty structure is causing cash flow problems, particularly for small and medium enterprises (MSMEs). Under the current system, edible oils are taxed at 5% GST, while input materials like packaging and chemicals are taxed at 12-18%, leading to a substantial buildup of unused tax credits.

With refunds now blocked, companies are facing working capital shortages and disrupted cash flows, making operations less viable, especially for smaller domestic manufacturers. The IVPA warns that these higher costs due to unrecovered tax credits are being passed on to consumers, potentially driving up prices and pushing lower-income buyers toward unsafe or adulterated oils.

The association is requesting that the government treat edible oils on par with other essential consumables like butter and ghee, which continue to receive refund benefits. The IVPA emphasizes that policy stability is critical for investment and reducing India's reliance on imported vegetable oils.