GST rates may effect biodiesel industry, major players to suffer setback

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New Delhi, June 12: High Goods and Services Tax (GST) rate on Biodiesel will be the “final nail” in the coffin for the sunrise and green sector which is already reeling under the pressure of high, complex and varied taxation policies of the states and lack of clarity on the policy front, has made it even more vulnerable to the industry players.
The green fuel – Biodiesel is required by the government which wants to cut its crude import by 10 percent and more so with an environment-friendly fuel. However, the high incidence of tax on biodiesel will make it costlier than diesel and ultimately make it uncompetitive.
Under the GST rates announced recently, biodiesel, ethanol and other mixing products would be charged 18 percent. For the last 10 years, Biodiesel attracted zero excise duty and even some states including the leading producing states of West Bengal, Uttar Pradesh, Uttarakhand, Chhattisgarh and Rajasthan, charged zero Value Added Tax (VAT) on biodiesel.
The real start to Biodiesel supply in India commenced only two years ago and is very much in its nascent stage. Having had the zero excise duty for the last 10 years, replacing the same with a very high 18 percent GST is totally biased against this renewable and eco-friendly fuel.
“It is a matter of great despair as 18 percent GST would make biodiesel costlier than diesel while the thrust globally is on eco-friendly and renewable fuel. It is a paradox when we have high pollution in the cities that a product like biodiesel that can reduce pollution, specifically particulate pollution is slotted in a very high tax structure rather than being exempted to improve its use. The high tax rise of Rs. five per liter would restrain mass consumption by even existing users like OMCs, Railways and Road Transporters. The farmers will switch back in to use of polluting fuels and other products,” said Biodiesel Association of India (BDAI) President, Sandeep Chaturvedi.
“There is something seriously amiss in this policy. Prime Minister Narendra Modi is pushing for Swachh Bharat with a cess and cutting consumption of crude oil to push green biofuels. Higher GST rate on biodiesel contradicts the government’s efforts to push this clean and green fuel,” he added.
“We were hopeful that the government’s intentions are clear and it would revive this green industry. However, it appears the GST Council failed to realise the importance of biofuels. There is an urgent need for course correction,” said Sandeep Chaturvedi.
Expressing similar sentiment, VK Jain, Executive Director, Ruchi Soya Industries Ltd. said, “In terms of revenue, the government is not going to be benefitted as the industry would collapse. The industry needs promotional tax and other policies to incubate and offer the best green fuel products. But higher GST rate has come as a major setback to the biodiesel sector.”
“It is a well-known fact that biodiesel across the world is being promoted as a green fuel which helps in mitigating particulate emission from diesel vehicles and reduces GHG (Green House Gas) emissions significantly. In view of this, the BDAI also seeks implementation of the pending National Policy on Bio-fuels. According to the industry players, the government should realize that European countries like UK, Germany, France and others have mandated the use of biodiesel of up to seven percent in transport fuels and is planning to increase the same to much higher levels in the years to come,” he added.
“That the decision to put a high rate at this stage is irrational. The government should initially push the industry and make the use of green fuel mandatory. The next phase would have seen capacity building and huge surge in the consumption of biodiesel. At this point of time, the government would have in a better position to collect tax. I think this (higher tax at this point in time) is a premature act,” said BDAI President, Sandeep Chaturvedi.
According to BDAI, India needs promotional policy and initially no tax for green fuel biodiesel. Promoting green fuel biodiesel would go long way in curbing vehicular emission and to protect the environment. At present, the use of Biodiesel is completely voluntarily and there is no mandate/obligation on the polluters to reduce the emission by using Biodiesel. A national policy that mandates the use of green fuels is urgent and the need of the hour given the rampant pollution across India. Any tax on Biodiesel will discourage the users and kill this sunrise Industry.
The industry produced and supplied close to 0.5 million tons to date and is gearing up to deliver up to 1million tons of Biodiesel by 2019 and this will provide half a million direct jobs and one million jobs to ancillaries. High taxation would not only put capacity building under pressure, but also pose a threat to jobs and the industry as a whole. (ANI)