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.
GST Rate on Different Types of Edible Oils
| Type of Oil | Packaging Type | 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.
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 (FAQs)
- 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.
