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New GST on Edible Oil: Tax Rates & Supply Chain Effect

Edible oil is a kitchen staple found in every Indian household. From mustard and sunflower oil to palm and refined oils, they are widely consumed across the country. But how does the  GST  on edible oil affect the final price you pay at the store? In this blog, we’ll explore the applicable GST rates,  HSN codes , impact on pricing, and how the tax affects both manufacturers and retailers in the supply chain.

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Is GST Applicable on Edible Oils?

Yes, under the Goods and Services Tax (GST) regime, all types of edible oils attract GST. This includes refined oils, unrefined oils, cooking oils, and oils derived from vegetable and animal sources.

The cooking oil GST rate varies slightly depending on the type and packaging but falls under the 5% slab in most cases.

New GST Rate on Edible Oils in India

The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for edible oils and related uses (no compensation cess).

New GST Rate on Different Types of Edible Oils

Type of Oil Packaging Type New GST Rate
Mustard Oil Packaged or loose 5%
Sunflower Oil Packaged 5%
Soybean Oil Packaged 5%
Groundnut Oil Packaged or loose 5%
Coconut Oil (Edible) Packaged 5%
Blended Edible Oils Packaged 5%
Oils used for industrial or cosmetic use Any type 18%

Old GST Rate on Different Types of Edible Oils

(Old GST Rates – Applicable Until 21st September)

Type of Oil Packaging Type Old GST Rate
Mustard Oil Packaged or loose 5%
Sunflower Oil Packaged 5%
Soybean Oil Packaged 5%
Groundnut Oil Packaged or loose 5%
Coconut Oil (Edible) Packaged 5%
Blended Edible Oils Packaged 5%
Oils used for industrial or cosmetic use Any type 18%

HSN Codes for Edible Oils

Edible oils fall under HSN codes ranging from 1507 to 1518, depending on the source of the oil.

Oil Type HSN Code GST Rate
Soybean Oil 1507 5%
Groundnut Oil 1508 5%
Olive Oil 1509 5%
Sunflower Oil 1512 5%
Palm Oil 1511 5%
Coconut Oil 1513 5%
Industrial Use Oils 1516, 1517, etc. 18%

Impact of GST on Cooking Oil Prices

Before GST, edible oils were taxed differently across states. Some levied VAT ranging from 4% to 6%. Under GST, the unified 5% rate has brought standardization but also transparency in pricing.

Increased transport, packaging, and processing costs can still add to the final price, but businesses can  claim Input Tax Credit , reducing cascading tax effects.

Input Tax Credit (ITC) on Edible Oils

Manufacturers, wholesalers, and retailers of edible oils can  claim ITC  on the GST paid for:

  • Packaging materials
  • Transportation services
  • Machinery and production equipment
  • Marketing and promotional expenses

This helps businesses reduce tax liability, though ITC is not available if the oils are used for personal consumption or exempt supplies.

Conclusion

The GST on edible oil stands at a standard 5%, making it relatively affordable for end consumers while maintaining tax compliance for businesses. Whether you’re a manufacturer, distributor, or retailer, understanding the correct cooking oil GST rate, HSN codes, and  ITC rules  ensures transparency and efficiency in the supply chain. With edible oils being essential products, accurate GST application is key to cost control and customer trust.

Nishant
Chartered Accountant
MRN No.: 445516
City: Delhi

I am a Chartered Accountant with more than five years of experience in the accounting field. My areas of expertise include GST, income tax, and audits. I am passionate about sharing knowledge through blogs and articles, as I believe that learning is a lifelong journey. My goal is to provide valuable insights and simplify financial matters for individuals and business owners alike.

Frequently Asked Questions

  • What is the GST on edible oil in India?
    Most edible oils are taxed at 5% GST under HSN codes ranging from 1507 to 1518.
  • What is the GST on cooking oil sold in bulk?
    Cooking oil, whether packaged or sold loose in bulk, generally attracts 5% GST.
  • Can oil used in cosmetics or industrial use attract different GST?
    Yes, non-edible oils or those used for industrial purposes attract 18% GST.
  • What is the GST rate for olive oil and sunflower oil?
    Both are considered edible oils and attract 5% GST when sold for human consumption.
  • Can businesses claim ITC on edible oil purchases?
    Yes, if used for business purposes like resale or further processing.