IB Group Poultry Feed Reconciliation — Input Tax Credit Discipline

A large integrated poultry feed manufacturer running a plant network across Andhra Pradesh, Telangana, and Chhattisgarh closes its books on 30 June with an aggregate monthly compound feed production of 50,000 MT split across a fortified poultry feed line and a cattle-and-aqua feed line. Every day, more than 1,600 MT of finished feed leaves the plant gate, sourced from an input register dominated by maize (mandi and direct-farmer procurement under HSN 1005, nil-rated), soya de-oiled cake (solvent-extraction procurement under HSN 2304, 5 percent GST), micronutrient premix and vitamin blends (18 percent), and polypropylene woven feed bag packaging (HSN 3923, 18 percent). The output register is not single-rate — a portion of the SKUs carry the nil-rate treatment under Notification 2/2017-Central Tax (Rate) for HSN 2309 prepared feed, while other fortified poultry feed variants are held out at 5 percent under Notification 1/2017-Central Tax (Rate). Sitting alongside is a Section 43B(h) MSME 45-day payment aging exposure of Rs 40 to Rs 60 crore per quarter against small maize traders and solvent-extraction units registered on Udyam, a Section 194Q (payment code 1031) TDS deduction schedule that flips at Rs 50 lakh aggregate procurement per supplier per financial year, and a Section 54(3) inverted-duty refund cycle on the nil-rated cattle-and-aqua feed leg where 5 percent input soya DOC and 18 percent input packaging accumulate as unutilised credit. This is IB Group poultry feed reconciliation input tax credit at operating scale, and the discipline that keeps the manufacturer’s Rule 89(5) refund claim, its Section 43B(h) deduction preservation, and its Section 194Q code 1031 remittance simultaneously clean is what separates a well-run integrator from one that spends the following financial year litigating a mis-apportioned inverted-duty refund and reversing a disallowed accrual-basis deduction on MSME payables.

Quick reference

The reconciliation in one paragraph

An integrated poultry feed manufacturer runs three simultaneous reconciliation streams and the ledger that binds them together is the SKU-level material master. The input procurement register captures maize (HSN 1005, nil-rated), soya de-oiled cake (HSN 2304, 5 percent), micronutrient premix and packaging (18 percent), and is layered with the Udyam Registration Certificate status of every supplier and the Section 194Q per-supplier year-to-date purchase aggregation. The output supply register splits the day’s production batches between fortified poultry feed SKUs (typically 5 percent output under specific Schedule I sub-classifications of Notification 1/2017-Central Tax) and standard cattle-and-aqua feed SKUs (nil-rated under Notification 2/2017-Central Tax Schedule I entry 102). The tax-side reconciliation apportions input ITC between the two output legs using SKU-level bill-of-materials weightings, feeds the nil-rated turnover and the apportioned Net ITC into the Rule 89(5) formula (with input services and capital goods excluded per the Notification 14/2022 amendment), and generates a Form GST RFD-01 refund draft against the nil-rated leg. Sitting alongside is a Section 43B(h) MSME payment aging bucket that surfaces any Udyam-registered supplier crossing the 45-day (or 15-day, absent written agreement) Section 15 MSMED Act window as a year-end deduction-preservation exception, and a Section 194Q code 1031 threshold-crossing register that flips the 0.1 percent deduction switch on every invoice from any single supplier PAN once the Rs 50 lakh aggregate financial-year threshold is breached.

What the scenario looks like in India

The integrated poultry-cum-feed model is the dominant operating template for large Indian broiler and layer producers. Under this model, one legal entity or a group of related entities operates the feed plant, the hatchery, the contract-farming grower network, and (in some cases) the primary processing facility for live-bird slaughter and dressing. Feed is the single largest cost head — commercial poultry feed formulations require 60 to 65 percent maize as the energy source and 25 to 35 percent soya de-oiled cake as the protein source, with the balance split across micronutrient premix, oil, salt, and specialty additives. The feed conversion ratio (FCR) — kilograms of feed consumed per kilogram of broiler live-weight gain — sits at approximately 1.6 to 1.9 for a well-run integrator, and the feed cost accounts for 60 to 70 percent of the total cost of production per bird.

Illustrative brand operators running integrated poultry feed and broiler chains at the scale relevant to this reconciliation include Suguna Poultry (the largest broiler integrator in India by volume, unlisted but industry-recognised, with a dominant presence in Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, and Maharashtra), Venkateshwara Hatcheries or Venky’s India (listed, with hatchery and feed operations anchored in Pune and a broader integrated presence), the Godrej Tyson joint venture (running the Real Good Chicken brand), IB Group / IB Foods (with plant clusters in Chhattisgarh, Odisha, and Telangana), Skylark Feeds, Sneha Farms, Shanthi Feeds, and Simran Farms. Regional geography drives the plant siting decision — maize procurement clusters around Karnataka, Telangana, Andhra Pradesh, Bihar, and Madhya Pradesh; soya de-oiled cake sourcing anchors on the solvent-extraction plants of Madhya Pradesh, Maharashtra, and Rajasthan.

The reconciliation footprint at a 50,000 MT-per-month feed operation is not marginal. Annual maize procurement can run into a 6,00,000 MT range, and soya DOC into a 1,50,000 MT range. At mandi and direct-farmer maize prices and prevailing soya DOC prices, the annual input procurement value moves into the four-digit-crore band. A share of this procurement — the maize from small mandi traders and the soya DOC from smaller solvent-extraction units that hold a valid Udyam Registration Certificate under the micro or small category — falls inside the Section 43B(h) perimeter. The remainder — high-volume trader aggregators and large solvent-extraction plants above the medium-enterprise threshold — sits outside 43B(h) but inside the Section 194Q code 1031 threshold at a per-supplier PAN aggregation basis.

The regulatory overlay — Section 43B(h), Notification 2/2017, Section 194Q, and Section 54(3)

Four regulatory anchors govern the input-tax-credit and payment-timing discipline for a poultry feed integrator, and each maps to a distinct reconciliation surface.

Section 43B(h) of the Income-tax Act 1961 — inserted by the Finance Act 2023 with effect from Assessment Year 2024-25 — provides that any sum payable by an assessee to a micro or small enterprise beyond the time limit specified in Section 15 of the MSMED Act 2006 shall be allowed as a deduction only in the previous year in which such sum is actually paid. The first proviso to Section 43B — which normally allows accrual-basis deduction if the sum is paid before the due date for filing the return under Section 139(1) — expressly does NOT extend to clause (h). This is the operative sharp edge for a poultry feed integrator whose supplier base is dotted with small maize mandi traders and small-to-medium solvent-extraction units registered on Udyam. Where a written agreement is on file, the payment window under Section 15 of the MSMED Act 2006 is 45 days from the date of acceptance or deemed acceptance of goods. Where there is no written agreement, the window compresses to 15 days. Payments delayed beyond that window are deductible only in the financial year of actual payment; the deduction cannot be carried on accrual basis into the year of expense recognition. Interest on delayed payment further accrues under Section 16 of the MSMED Act at three times the RBI-notified bank rate compounded monthly, and this interest is itself not deductible as a business expense under an explicit disallowance in the Explanation to Section 37(1). The reconciliation surface is a supplier-level payment-aging bucket keyed to Udyam Registration Certificate status and the acceptance-of-goods date on each purchase order — with a year-end 43B(h) exception report that flags every payable beyond the 45-day (or 15-day) window as a deduction-preservation risk.

Notification 2/2017-Central Tax (Rate) dated 28 June 2017 — Schedule I entry 102 — exempts aquatic feed including shrimp and prawn feed, poultry feed, and cattle feed (including grass, hay, straw, supplement, husk of pulses, concentrates, additives, wheat bran, and de-oiled cake) under HSN 2302, 2304, 2305, 2306, 2308, and 2309 from CGST. This is the nil-rate anchor for the cattle-and-aqua feed leg of the manufacturer’s output portfolio and for the raw soya de-oiled cake input where the input is applied downstream to nil-rated output. Certain fortified feed premix, medicated feed additive, and concentrated compound feed variants are held out at 5 percent under Schedule I of Notification 1/2017-Central Tax (Rate) — the applicable rate at the SKU level depends on the product HSN sub-classification and any Advance Ruling the manufacturer relies on. The reconciliation implication is that the output ledger is not a single-rate ledger; it must be split at the SKU level between the nil-rated leg and the 5 percent-rated leg before any input ITC apportionment can be done.

Section 8 Sl. 8 code 1031 of the Income-tax Act 2025 is the successor payment code to legacy Section 194Q of the Income-tax Act 1961 and governs TDS on payment for purchase of goods. A buyer whose total sales, gross receipts, or turnover from business exceeded Rs 10 crore in the immediately preceding financial year must deduct TDS at 0.1 percent on the aggregate purchase value from any resident seller that exceeds Rs 50 lakh in a financial year. The threshold is computed per seller per financial year cumulatively from the first rupee of purchase, and once the Rs 50 lakh threshold is breached every subsequent invoice attracts the 0.1 percent deduction at the point of payment or credit whichever is earlier. For a 50,000 MT-per-month feed operation, the Rs 50 lakh threshold is typically breached within the first or second quarter for high-volume maize traders and solvent-extraction suppliers, and the deduction switch must flip cleanly at the invoice-processing stage. Where the seller is also liable to collect TCS under Section 206C(1H) on the same supply, Section 194Q takes precedence and the seller does not collect TCS. The reconciliation surface is a per-supplier PAN YTD purchase aggregation with a threshold-crossing alert; a related cross-reference walkthrough sits in TDS payment code 1031, Section 393 Sl. 8 purchase of goods.

Section 54(3) of the CGST Act 2017 read with Rule 89(5) of the CGST Rules 2017 (as amended by Notification 14/2022-Central Tax dated 5 July 2022) provides for refund of unutilised input tax credit accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies — the inverted duty structure. Maximum Refund Amount = (Turnover of inverted-rated supply of goods and services x Net ITC / Adjusted Total Turnover) minus (Tax payable on such inverted-rated supply x Net ITC / ITC availed on inputs and input services). Net ITC excludes input services and capital goods, as confirmed by the Supreme Court in Union of India v. VKC Footsteps India Pvt Ltd (2021) 10 SCC 674. For a feed manufacturer with a mixed-rate output portfolio, the Turnover of inverted-rated supply in the numerator is only the nil-rated cattle-and-aqua feed turnover — not the aggregate output — and the ITC apportionment between the two output legs must be documented at the SKU level using the feed-formulation master. The same inverted-duty mechanic is the operative refund cycle in the dairy sub-cluster; the fuller treatment is at Dairy inverted-duty refund under Rule 89(5) post GST 2.0.

A worked example — an IB Group-scale integrator at monthly close

Illustrative — the following figures represent the operating pattern of an integrated poultry feed manufacturer at the scale of an IB Group-class operation. Actual per-SKU HSN classification, output rate, and Advance Ruling reliance vary by manufacturer; cross-verify against your own SKU master and current CBIC notification before action.

The integrator’s monthly compound feed production of 50,000 MT is split as follows for the reconciliation month: 30,000 MT of fortified poultry feed variants classified at 5 percent output GST (60 percent of production), and 20,000 MT of cattle-and-aqua feed classified at nil output GST (40 percent of production). Ex-plant realisation for the fortified poultry feed leg is Rs 42,000 per MT on average, generating a turnover of Rs 126 crore; the cattle-and-aqua feed leg realises Rs 32,000 per MT on average, generating a nil-rated turnover of Rs 64 crore. Aggregate monthly turnover: Rs 190 crore.

The input procurement register for the same month records the following key positions:

Applying the SKU-level bill-of-materials apportionment — where the same soya DOC input flows to both the 5 percent-output poultry feed line and the nil-output cattle feed line in weightings drawn from the feed-formulation master — the manufacturer allocates approximately 62 percent of soya-DOC ITC and 60 percent of packaging ITC to the 5 percent-output leg and the balance to the nil-output leg. The 5 percent-output-leg ITC (fully utilisable against the Rs 6.30 crore output tax liability on Rs 126 crore of poultry feed sales at 5 percent) is set off against the electronic credit ledger in the routine GSTR-3B run. The nil-output-leg ITC — approximately Rs 1.82 crore across soya DOC and packaging combined for the illustrative month — is fed into the Rule 89(5) refund workbook.

Under the Notification 14/2022-amended Rule 89(5) formula (Maximum Refund = (Turnover of inverted-rated supply x Net ITC / Adjusted Total Turnover) minus (Tax payable on inverted-rated supply x Net ITC / ITC availed on inputs and input services)), the manufacturer files a Form GST RFD-01 refund claim against the apportioned nil-output-leg ITC. Net ITC in the numerator excludes input services (freight, cold-chain, maintenance) and capital goods (mixers, extruders, palletisers) — those must be tracked separately for their own refund provisions.

The MSME payment-aging register for the month surfaces an illustrative Rs 48 crore of quarterly turnover-through-Udyam-registered suppliers across small maize mandi traders and small solvent-extraction units. Of this, an outstanding of approximately Rs 7 crore is aged between 30 and 45 days from the acceptance date; approximately Rs 1.5 crore is beyond 45 days. Under Section 43B(h) read with Section 15 of the MSMED Act 2006, the Rs 1.5 crore beyond the 45-day window is not deductible on accrual basis in the current financial year and must either be paid before the year-end to preserve the same-year deduction or carried as a deferred deduction into the following year. A written-agreement flag on each supplier master governs whether the 45-day or the 15-day Section 15 window applies.

The Section 194Q code 1031 register for the same month shows that four maize trader-aggregators and two solvent-extraction suppliers have crossed the Rs 50 lakh cumulative financial-year threshold. On every invoice from those six suppliers, the manufacturer deducts 0.1 percent TDS under code 1031 at the point of credit and remits it against the supplier PAN on the monthly Form 26Q filing. The supplier’s Form 26AS reflects the credit within 15 days of the filing quarter close.

Common reconciliation breakages

Five breakages recur across integrated poultry feed operations of this scale, and each maps to a specific control failure.

• SKU-level output rate mis-classification. A fortified poultry feed variant may be held out at 5 percent under one HSN sub-classification and at nil under another, and the manufacturer’s SKU master must lock the classification against a specific tariff heading and any Advance Ruling relied upon. Slippage between the two output rates at the SKU master level cascades into wrong ITC apportionment, wrong Rule 89(5) refund quantum, and wrong output tax liability in GSTR-3B.

• De-oiled cake versus day-old chick DOC-tagging error. The abbreviation DOC in poultry integrator finance means both de-oiled cake (soya-meal residue, HSN 2304, 5 percent) and day-old chick (newly-hatched broiler, HSN 0105, nil). Confused general-ledger tagging aggregates both against a single supplier PAN in the Section 194Q YTD purchase register — one of the two must be re-tagged before the deduction switch is applied, or the threshold-crossing computation triggers on an aggregated figure that is not the actual purchase from that supplier.

• Section 43B(h) 45-day versus 15-day window mis-application. The Section 15 MSMED Act window is 45 days only where a written agreement exists between buyer and supplier. Absent a written agreement, the window compresses to 15 days. Manufacturers who default their entire supplier base to the 45-day window carry a hidden 43B(h) exposure on every supplier where the written agreement is missing from the vendor master.

• Rule 89(5) Net ITC over-inclusion. Some manufacturers continue to include input services (freight, cold-chain, plant maintenance) and capital-goods ITC (mixers, extruders, palletisers) in the Net ITC numerator of the Rule 89(5) formula. The Notification 14/2022 amendment and the Supreme Court in VKC Footsteps both exclude input services and capital goods from Net ITC. Over-inclusion inflates the refund claim and triggers a partial disallowance at the proper officer’s post-facto audit under Section 74.

• Section 194Q threshold-crossing missed at the invoice-processing stage. The Rs 50 lakh threshold is computed cumulatively per supplier PAN from the first rupee of the financial year, not per invoice. Manufacturers that check the threshold only at month-end miss the exact invoice on which the switch flipped and under-deduct on the first two or three invoices above the threshold in the transition period. Section 201 short-deduction interest and penalty exposure follows.

How a reconciliation platform handles this

A purpose-built agro-processing reconciliation platform ingests the SKU-level material master, the per-supplier Udyam Registration Certificate register, the daily production batch log split by output SKU, the input procurement invoice register keyed to HSN and rate, and the GSTR-1 and GSTR-3B feed — and produces a per-plant-per-tax-period reconciliation view that closes the loop from the maize weighbridge slip at plant intake through to the Form GST RFD-01 refund draft and the Section 43B(h) year-end deduction-preservation exception report. The platform apportions input ITC between the 5 percent-output and nil-output legs using the SKU-level bill-of-materials weightings, generates the Rule 89(5) refund workbook under the Notification 14/2022 amended formula with input services and capital goods correctly excluded, runs the Section 43B(h) MSME payment-aging bucket keyed to Udyam status and acceptance date, and flips the Section 194Q code 1031 deduction switch at the invoice-processing stage from the first rupee above the Rs 50 lakh cumulative supplier threshold. Match rate improvement of 51 to 88 percent across the input-output apportionment and the supplier-payment reconciliation, combined with an ISO 27001:2022 posture and DPDP Act 2023 aligned data handling, is what makes the platform an infrastructure investment for a large integrated feed manufacturer rather than a spreadsheet substitute.

Cross-cluster bridges and where to read next

The feed-formulation and FCR discipline that governs the input-consumption ratio used for ITC apportionment is unpacked in the sibling walkthrough on Skylark Hatcheries feed formulation reconciliation FCR. The contract-farming settlement mechanics that consume this feed at the grower end — and where the Section 143 CGST job-work provisions apply to bird-plus-feed supply — sit in Poultry contract farming reconciliation broiler. The sub-vertical index for the entire nine-cluster agro-processing footprint sits at the Agro processing reconciliation India nine sub-verticals master. The same Section 54(3) plus Rule 89(5) inverted-duty mechanic at work here on the cattle-and-aqua feed leg is unpacked in fuller depth for the dairy sub-cluster at Dairy inverted-duty refund under Rule 89(5) post GST 2.0. The cross-cluster TDS-side reference for the 194Q code 1031 threshold-crossing mechanic that this article applies to every high-volume maize and soya supplier sits in TDS payment code 1031, Section 393 Sl. 8 purchase of goods. The commercial pillar for the entire agro-processing sub-cluster is Agro processing reconciliation software India; the broader authority is reconciliation software India.

The five FAQs below address the operational questions Indian poultry feed integrator finance leads ask most often when implementing structured dual-rate output ITC apportionment, Section 43B(h) MSME payment discipline, and Section 194Q code 1031 threshold-crossing automation.

Terra Insight Editorial Team Reconciliation Infrastructure

Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →

Published 12 July 2026

Domain expertise

TDS Reconciliation GST Input Credit Platform Settlements NACH Batch Matching Bank Reconciliation Form 26AS Matching ERP Integrations Enterprise Finance Ops

Reviewed by

NK

Navin Krishnan

Managing Director & Founder — Terra Insight

Ex Amazon India · Intuit QuickBooks · Tata nexarc

ISO 27001:2022 Patent Pending Incorporated 2024