Phosphates: India revises GST tax rates on phosacid

The Indian goods and services tax (GST) council has recommended that the GST on phosphoric acid should be reduced from 12pc to 5pc, a government of India notification said.

The reduction in tax rates would be effective from 27 July, assuming it is ratified.

Producers of DAP in India have been reeling under the high cost of imported raw materials such as phosphoric acid and ammonia, which strains their margins when compared with the local maximum retail price — MRP — of DAP.

The phosphoric acid contracts in the third quarter were settled at $758/t P2O5 cfr in India. Reducing the GST on the product eases the burden on local phosphate producers who import phosphoric acid as a feedstock, as the rupee continues to decline against the dollar. The exchange rate fell to a new low of Rs69.13 to the dollar last week, before rebounding to Rs68.5 to the dollar today.

The net effect of the GST cut will most probably be an increase in domestic DAP output, which has lagged considerably this year because of high production costs.