Business

‘GST hits activated carbon production’

Shell-shocked: Availability of coconut shells has come down
and charcoal prices are up three times since June this year.

Shell-shocked: Availability of coconut shells has come down and charcoal prices are up three times since June this year.  

‘Levy of 5% tax on coconut shells, an ingredient, affects farmers, vendors’

Production of coconut-activated carbon, used for purification of water, edible oil and gas and in sectors such as healthcare and cosmetics, has been hit due to increasing raw material prices post the implementation of the Goods and Services Tax (GST).

Whole coconuts, coconut kernel and husk do not attract GST. However, 5% duty is levied on coconut shells. These shells are sold by farmers and vendors in the unorganised sector to charcoal producers.

Charcoal is not covered under GST. It is the raw material used by activated carbon producers. Activated carbon attracts 18% GST, said P. Pradeepkumar, managing partner, Activcarb. There are about 15 units in South India making activated carbon from coconut shells.

Exports

According to data available with the Coconut Development Board, activated carbon is exported mainly to the U.S., the U.K. and South Korea. This increased to 40,132 tonnes worth ₹402 crore during the same period last year.

Mr. Pradeepkumar said about three tonnes of charcoal is needed to manufacture one tonne of activated carbon. Availability of coconut shells has come down and charcoal prices are up almost three times since June this year. This is because charcoal producers cannot take input credit of the duty paid on coconut shells.

In the case of supply of activated carbon to the domestic market, the buyers are able to take input credit of the GST paid. But, costs have gone up for exporters. The activated carbon industry is growing at 5% annually and exports at 10% to 15%.

In a memorandum to the Union Agriculture Minister recently, the Coconut Activated Carbon Manufacturers’ Association pointed out that coconut shells are an agricultural waste product.

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Printable version | May 23, 2020 2:04:52 AM | https://www.thehindu.com/business/gst-hits-activated-carbon-production/article19525436.ece

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