Our Viewpoint: The Recent GST Withdrawal on Fumigation Services of Agri Produce in Warehouses to be Re-considered

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Mr. Ramesh Doraiswami, Managing Director & CEO, National Bulk Handling Corporation has voiced his opinion on the recent GST levy on Fumigation services and that it should remain exempt.

New Delhi, July 13, 2022: Fumigation is an integral part of the scientific storage of agri produce of mass consumption such as wheat, maize, pulses etc. The GST Council has recently announced the withdrawal of the Exemption on Fumigation of Agri produce in warehouses from 18th July 2022. Fumigation being a key scientific component of the storage of Agri produce has been singled out for levy of GST, which will result in ‘cost burden on the agri value chain’. It can also lead to a reduction in farmer realization or an increase in consumer price.

Importance of Fumigation of Agri Produce:

To maximize farm income and ensure continued food availability, storage for 6-9 months is imperative. Since infestation is common during such prolonged storage beyond 30-45 days, the desired and regulated procedure required is Fumigation. It is a process of subjecting the infested stocks/storage structures/containers to lethal fumes of fumigation in an enclosed atmosphere with sufficient concentration for appropriate exposure time. In a Warehouse, Fumigation is carried out by applying fumigant (ALP tablet or pouches) by covering the stack with gas-retaining plastic sheets used to hold fumigant gases inside a fumigation enclosure during the exposure period. Fumigation is a curative treatment and the only practical way to kill internal insects or insects dwelling deep within the grain mass.

Fumigation is a Regulatory requirement in most of the importing countries. The increase in demand for improved Food Safety Standards throughout the world has imposed the requirement for good and quality food products.  Fumigation plays a more important role in controlling and in the management of infestation in commodities stored in tropical countries like India, where climatic conditions are favorable for infestation of stored grain pests. This process of Fumigation is a mandatory quarantine requirement.

Storage Loss due to Infestation:

In India, 10% of the total post-harvest losses happen because of unscientific storage. Annual storage losses have been estimated to be 14 million tonnes, which is amounting an approx. INR 7000 Crs., out of which the stored grain insect pests alone account for INR 1300 Crs.

Since fumigation and prophylactic treatment are an integral part of scientific storage, these services need to be carried out with precision, as even partial damage to quality due to insects can result in a complete loss of commercial value of food grains.  Additionally, there is a possibility that this additional levy could result in Fumigation Services being carried out in an unorganized manner by untrained operators, thereby resulting in safety hazards to the operator and also harming public safety.

Furthermore, given the low cost of Fumigation, there is a relatively insignificant revenue implication of GST levy to the exchequer compared to the downside on grain quality and farm incomes.

Hence, considering the given challenges, we strongly appeal to the Ministry of Agriculture, Warehouse Department Regulatory Authority, the GST Council, and the Central Board of Indirect Taxes to re-consider the decision by rolling back the proposed Withdrawal of Exemption of GST on Fumigation Services of Agri Produce in Warehouses.