The government is likely to reduce the GST rate on fertilisers from 12 per cent to ensure that their prices do not rise and farmers' interests are protected.
At present, taxes on fertilisers are in the range of 0-6 per cent in different states, but from 1 July, a uniform 12 per cent will be effective.
With the proposed GST rate, retail prices could go up by Rs.30-120 per bag (50kg) on urea, Di-ammonium phosphate (DAP) and potash in states like Punjab, Haryana, Andhra Pradesh where there is nil tax on soil nutrients.
The industry has made several representations to the fertiliser ministry for revision in the GST in the interest of farmers arguing that such high rate would upset farmers as it would only increase their cost of production.
According to sources, the fertiliser ministry has taken up the issue with the finance ministry, which has further put the proposal before the GST Council.
The issue, the sources said, is under the active consideration of the Council as it would impact the farm community at a time when the government is aiming to double farmers' income by 2022.
Retail price of urea, which is fixed by the government, is at Rs.5,360 per tonne now. The prices of DAP and potash, fixed by private companies, are at Rs.22,000 and Rs.11,000 per tonne, respectively.
The announcement on reduction in fertiliser GST rate is expected in coming weeks.
Meanwhile, the government is working whether to allow companies to reprint the revised rate on old stocks on which MRP is already printed.