Just as the goods and services tax in India was to take effect July 1, the government dropped the tax on fertilizers from 12 percent to 5 percent, bowing to pressure from the fertilizer ministry and fertilizer industry. The government also announced it would review also lowering the tax on phosphoric acid and ammonia from the new 18 percent rate under the GST.
The GST caused a great deal of confusion in the industry, including cutting back on import demand for phosphates and urea.
The fertilizer industry argued the current state taxes on fertilizers range from zero to 6 percent. The removal of those taxes and the imposition of the new GST at 12 percent, the industry and fertilizer ministry argued, put an undue burden on farmers.
The GST was designed to supplant a variety of different regional and statewide taxes on goods and services with one national tax.