ChemicalsPetrochemicals & Polymers

GST on Chemicals & Petrochemicals — 18% Standard, Fertilizers 5%, Paints 28%

Complete GST guide for chemical industry: basic chemicals (18%), fertilizers (5% concessional), pesticides (18%), paints & coatings (28%), petrochemicals & polymers (18%), industrial gases, explosives, specialty chemicals, and inverted duty structure refunds.

18%

Basic Chemicals

5%

Fertilizers

18%

Pesticides/Insecticides

28%

Paints & Varnishes

18%

Plastics (raw)

18%

Dyes & Pigments

18%

Industrial Gases

18%

Explosives

Chemicals & Petrochemicals — GST Framework

Basic & Industrial Chemicals — 18%

Most basic/industrial chemicals: 18% GST. Sulphuric acid: 18%. Hydrochloric acid: 18%. Nitric acid: 18%. Caustic soda (sodium hydroxide): 18%. Soda ash (sodium carbonate): 18%. Chlorine: 18%. Ammonia: 18%. Hydrogen peroxide: 18%. Formaldehyde: 18%. Methanol: 18%. Acetone: 18%. Ethylene glycol: 18%. Carbon black: 18%. Industrial gases (oxygen, nitrogen, argon, CO2): 18%. Medical-grade oxygen: 12% (reduced during COVID, now permanent). Liquid nitrogen (cryogenic): 18%. Helium: 18%. Specialty/fine chemicals (lab reagents, analytical grade): 18%. Chemical catalysts: 18%. Water treatment chemicals (alum, PAC, chlorine): 18%. Chemical waste disposal service: 18%. KEY POINT: chemical industry faces NO inverted duty structure — most inputs AND outputs at 18% (unlike pharma/textiles). ITC chain works smoothly for most chemical manufacturers.

Fertilizers — Concessional 5%

ALL fertilizers: 5% GST (concessional rate to support agriculture). Urea: 5%. DAP (Di-Ammonium Phosphate): 5%. NPK complex: 5%. MOP (Muriate of Potash): 5%. SSP (Single Super Phosphate): 5%. Micronutrient fertilizers: 5%. Organic/bio-fertilizers: 5%. City compost (from municipal waste): 5%. Raw materials for fertilizers: phosphoric acid 18%, ammonia 18%, sulphur 18%, potash 18%. INVERTED DUTY STRUCTURE: inputs at 18% → output at 5% = massive ITC accumulation. Fertilizer companies file refund claims under Section 54(3) — largest refund claimants in India. Government compensates through subsidy + refund mechanism. Neem-coated urea: 5%. Soil testing services: 18% (service). Custom fertilizer blending: 5% (treated as manufacturing of fertilizer). Fertilizer bags/packaging: 18% (but forms part of composite supply at 5% when packed fertilizer sold). Import of fertilizer: 5% IGST + BCD as applicable.

Petrochemicals & Polymers — 18%

Petrochemical products (derived from petroleum but INSIDE GST — unlike crude/petrol): Polyethylene (PE): 18%. Polypropylene (PP): 18%. PVC (polyvinyl chloride): 18%. Polystyrene: 18%. ABS resin: 18%. Nylon/polyamide: 18%. PET (polyethylene terephthalate): 18%. Acrylic polymers: 18%. Synthetic rubber: 18%. Carbon fibre: 18%. Plasticizers (DOP, DINP): 18%. Polymer masterbatch: 18%. Plastic raw material (granules/pellets): 18%. Finished plastic products (containers, bottles, bags): 18%. Plastic furniture: 18%. Single-use plastic ban: GST rate unchanged but SALE banned for certain items (straws, plates, cups — can't sell, so GST irrelevant). Woven sacks (PP/HDPE): 18%. Flexible packaging film: 18%. Key distinction: PETROLEUM (crude, petrol, diesel) = OUTSIDE GST. PETROCHEMICALS (derived products entering manufacturing) = INSIDE GST at 18%. This creates border issues — naphtha (18% GST) is input for both petrochemicals (GST) and petroleum refining (non-GST).

Paints, Adhesives & Coatings — 28%

Paints & varnishes: 28% GST (luxury/sin good classification). Enamel paint: 28%. Emulsion paint (interior/exterior): 28%. Primer/putty: 28%. Wood polish/varnish: 28%. Anti-corrosive paint: 28%. Marine coating: 28%. Industrial coating: 28%. Automotive paint: 28%. Road marking paint: 28%. Thinner/solvent: 18%. Turpentine: 18%. Adhesives (Fevicol etc.): 18%. Epoxy resin: 18%. Sealants/caulking: 18%. Waterproofing chemicals: 18%. Paint brushes/rollers: 18%. Spray paint cans: 28%. Printing ink: 18%. KEY ISSUE for paint companies: raw materials (TiO2, pigments, solvents, resins) at 18% → finished paint at 28%. No inverted duty — actually NORMAL cascade. But paint is among few items still at 28% without cess — industry lobbies for 18% reduction (claims paint is necessity, not luxury). Counter-argument: government earns ₹8,000+ crore annually from 28% on paints. Comparison: cement reduced from 28% to proposed 18% (under discussion) but paints remain at 28%.

Agrochemicals — Pesticides & Crop Protection

Pesticides/insecticides/fungicides/herbicides: 18% GST (was 12% initially, increased in 2022 revision for some). Specific rates: Insecticides (technical grade): 18%. Fungicides: 18%. Herbicides/weedicides: 18%. Plant growth regulators: 18%. Bio-pesticides: 18%. Neem-based pesticides: 18% (despite being organic). Rodenticides: 18%. Fumigants: 18%. Seed treatment chemicals: 18%. Micronutrient sprays: 12%. Crop protection equipment (sprayers): 12%. Agricultural drone for spraying: 18% (drone) + 18% (spraying service). Pest control services (commercial — buildings): 18%. Pest control (agricultural — by government scheme): exempt. KEY CONCERN: farmers buy pesticides at 18% but agricultural output is EXEMPT (0%) → farmer cannot claim ITC → 18% becomes embedded cost. Unlike fertilizers (5% concessional), pesticides don't receive lower rate despite same agricultural purpose. Industry demands: reduce to 5% to match fertilizer logic. Government resistance: revenue impact ₹3,000+ crore.

Specialty & Pharmaceutical Chemicals

Pharmaceutical intermediates/APIs: 18% (active pharmaceutical ingredients used in drug manufacturing). Drug formulations (finished medicines): 12% (standard) or 5% (essential/life-saving). This creates INVERTED DUTY: API at 18% → medicine at 12%/5% = pharma companies claim refunds. Cosmetic chemicals (for personal care products): 18% (input) → cosmetics output at 28%. Fragrance/flavour chemicals: 18%. Food-grade chemicals (citric acid, food colours, preservatives): 18%. Textile chemicals (sizing agents, dyeing auxiliaries): 18%. Leather chemicals (tanning agents, finishing): 18%. Rubber chemicals (accelerators, antioxidants): 18%. Oilfield chemicals (drilling mud, cementing): 18%. Mining chemicals (flotation reagents, cyanide): 18%. Water treatment chemicals: 18%. Electronic-grade chemicals (semiconductor — ultra-pure): 18%. Battery chemicals (lithium carbonate, cobalt): 18%. Hydrogen (industrial): 18%. Green hydrogen: 18% (industry demanding 5% — PLI linked). Laboratory chemicals/reagents: 18%.

Chemicals & Petrochemicals — GST Rate Table

ItemHSN/SACGST RateNotes
Sulphuric/hydrochloric acid2807/280618%Basic industrial chemicals
Caustic soda (NaOH)281518%Major industrial input
Fertilizers (all types)3102-31055%Concessional for agriculture
Pesticides/insecticides380818%Crop protection chemicals
Paints & varnishes3208-321028%Luxury classification
Polyethylene/polypropylene3901/390218%Polymer raw material
PVC resin390418%Construction & piping
Adhesives (Fevicol etc.)350618%Bonding agents
Industrial gases (O2, N2)280418%Manufacturing input
Medical oxygen280412%Reduced rate (health)
Dyes & pigments3204-320618%Textile/paint input
Explosives (commercial)3601-360418%Mining/construction

Frequently Asked Questions

Why are fertilizers at 5% GST while pesticides are at 18% — both are agricultural inputs?
This disparity is POLICY-DRIVEN, not logic-driven: FERTILIZERS at 5%: (1) Directly consumed by crops — essential for food security. (2) Politically sensitive — 70% of voters are farming families. (3) Government already subsidizes fertilizers (₹2+ lakh crore annually) — high GST would increase subsidy burden. (4) Pre-GST: fertilizers were either 0% VAT or very low (1-5% in most states). (5) International comparison: most countries exempt or zero-rate fertilizers. PESTICIDES at 18%: (1) Classified as 'chemical preparations' not 'agricultural necessity'. (2) Pre-GST: pesticides attracted 12-14% VAT + excise — effective 16-18% total. (3) Environmental concerns — government doesn't want to encourage excessive pesticide use. (4) Health hazards — WHO classifies many pesticides as carcinogenic. (5) Revenue: ₹3,000 crore from 18% vs ₹1,000 crore at 5% — ₹2,000 crore revenue gap. IMPACT on farmers: fertilizer cost includes 5% embedded GST. Pesticide cost includes 18% embedded GST. Combined: 8-10% cost increase vs pre-GST era (when agricultural inputs had various exemptions). Industry demand: reduce pesticides to 5% (pending with GST Council since 2019 — no action).
How does the inverted duty structure work for fertilizer manufacturers — and how to claim refunds?
INVERTED DUTY STRUCTURE explained: Fertilizer manufacturer buys: (a) Ammonia at 18% GST, (b) Phosphoric acid at 18%, (c) Sulphur at 18%, (d) Potash at 18%, (e) Machinery/equipment at 18%, (f) Packaging at 18%, (g) Services (freight, testing) at 18%. Fertilizer manufacturer sells: DAP/NPK/Urea at 5% GST. RESULT: Huge ITC accumulation every month. Example: Purchase inputs worth ₹100 crore → ITC ₹18 crore. Sell fertilizer worth ₹120 crore → Output GST ₹6 crore. Net ITC balance: ₹12 crore ACCUMULATED (can't use, output too low). REFUND PROCESS: File refund under Section 54(3)(ii) — 'refund of ITC on account of inverted tax structure'. Formula: Maximum refund = (Turnover of inverted rated supply ÷ Adjusted total turnover) × Net ITC − Tax payable on inverted rated supply. Timeline: refund processed within 60 days (usually). Major fertilizer companies (IFFCO, NFL, RCF, Chambal, Coromandel) file monthly refund claims of ₹50-200 crore each. Total industry refunds: estimated ₹15,000-20,000 crore annually. Government proposed SOLUTION: raise fertilizer GST to 12% (reduce inversion) — but politically impossible (farmers would see price increase).
Is GST applicable on industrial gases like oxygen and nitrogen — what about medical oxygen?
INDUSTRIAL GASES: 18% GST. Oxygen (industrial grade): 18%. Nitrogen: 18%. Argon: 18%. Carbon dioxide: 18%. Hydrogen: 18%. Acetylene: 18%. Helium: 18%. Compressed air: 18%. LPG (industrial): 18%. Dry ice (solid CO2): 18%. MEDICAL OXYGEN: 12% GST (reduced from 18% during COVID-19 second wave in May 2021 — made PERMANENT). Also at 12%: medical-grade nitrogen, medical-grade nitrous oxide (anaesthesia). KEY DISTINCTION: Same molecule (O2) — different classification based on USE/PURITY/CERTIFICATION. Industrial oxygen: 99.5% purity, HSN 2804.40, 18% GST. Medical oxygen: 99.5%+ purity, pharmacopoeia-grade, drug license required, HSN 2804.40 (same) but notification rate 12%. How to classify: (a) If sold to hospital/medical institution with drug license documentation: 12%. (b) If sold to factory/industrial user: 18%. (c) Same cylinder, same gas — rate depends on buyer's declared end-use and seller's license type. Cylinder rental (empty cylinder on rent): 18% (service — rental of goods). Cylinder deposit (refundable): not supply — no GST. Gas pipeline supply (continuous): 18% on metered consumption.
What is GST on plastic products — raw materials vs finished goods vs recycled plastic?
PLASTIC RAW MATERIALS (polymers/resins): 18% GST. Polyethylene granules: 18%. Polypropylene: 18%. PVC resin: 18%. PET chips/flakes: 18%. Nylon: 18%. ABS: 18%. Polycarbonate: 18%. FINISHED PLASTIC PRODUCTS: mostly 18%. Plastic containers/bottles: 18%. Plastic bags (non-woven): 18%. Plastic furniture: 18%. Plastic pipes (PVC/CPVC): 18%. Plastic sheets/films: 18%. Plastic toys: 12%. Plastic bangles: 0% (exempt — essential for married women in India). Plastic stationery (pens, rulers): 18%. Plastic kitchenware: 18%. RECYCLED PLASTIC: Plastic waste/scrap: 5% (to encourage recycling). Recycled plastic granules: 18% (same as virgin — no concession despite being eco-friendly). Recycling service: 18%. SINGLE-USE PLASTIC BAN: GST rate is IRRELEVANT for banned items (can't sell = can't collect GST). But banned items still imported (for export manufacturing): GST still applies on import for re-export. Biodegradable alternatives: 18% (no concessional rate despite being eco-friendly — industry demands 5%). Compostable packaging: 18%. PLA (polylactic acid — bio-plastic): 18%.

Chemical Industry Billing — Multi-Rate HSN, Inverted Duty Refunds, Hazmat Compliance

Laabam.One handles complex chemical industry GST: fertilizer inverted duty refund computation, paint 28% vs chemical 18% classification, petrochemical vs petroleum boundary tracking, industrial gas multi-rate invoicing, and agrochemical ITC management.

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