What a GST cut will mean for fertiliser companies, analyst weighs in

Fertiliser stocks have been in focus over the last few days with the Street anticipating some relief in Goods and Services Tax (GST) on the sector at the upcoming GST Council meeting on June 22.

Sources told CNBC-TV18 that the Fitment Committee, nominated by the Council, has recommended that the Group of Ministers on rate rationalisation consider exempting the fertiliser sector from the currently applied 5% GST.

The Fitment Committee also urged that the argument to exempt GST on fertiliser has been supported by the Standing Committee on Chemicals & fertilisers, which proposed the GST Council to consider the request.

However, according to Himanshu Binani, Research Analyst at Anand Rathi Institutional, a GST rate realignment is unlikely to have any meaningful impact on the earnings of fertiliser companies.

He pointed out that the industry has been seeking this GST exemption for a while now.

He believes a revision in the direct benefit transfer (DBT) regime may be more beneficial in reducing working capital and reducing interest costs.

According to him, if all the natural gas is also coming under the GST regime, there will be no impact on the profit and loss (P&L) for the urea companies.

Read more at: CNBC TV18