Edible oil is in the essential commodity category, which attracts the lowest GST rate of 5%.

The tax slab for the edible oil sector under the coming national goods and services tax (GST) is likely to be revenue-neutral. Besides checking tax evasion, this is likely to improve the overall efficiency in the sector, experts said.

Edible oil is in the essential commodity category, which attracts the lowest GST rate of five per cent; the overall rate would be nearly 5.5 per cent.

“Inflation on edible oil is not only managed by tax. The government has import duty as another tool, with a large part (of supply) imported. GST would improve efficiency in the supply chain,” said Siraj Chaudhry, chairman, Cargill India.

India produces 7-7.5 million tonnes of edible oil annually, a third of its consumption. The rest is met through imports, primarily from Indonesia, Malaysia and Argentina. This year’s import is likely to be a record 15.5 mt.

Operating at a one to two per cent, some small and medium size entities opt for tax evasion to avoid loss. GST is expected to help check this. “Keeping edible oil in the lowest slab category would encourage genuine business in the system,” said B V Mehta, executive director, Solvent Extractors’ Association of India.

“We are analysing the impact; a lot of clarity is required on the GST structure announced recently. Including edible oil in the lowest category of taxation under GST will help enlarge the food security net,” said Dinesh Shahra, managing director, Ruchi Soya Industries.