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GST agriculture has changed the Indian economy since July 1, 2017. India’s economy relies on agriculture, which GST changes. This page discusses GST’s multifaceted impact on agriculture, including taxation, exemptions, and larger consequences. Diversity in India’s agriculture business is vital to its economy. As a major producer and exporter of rice, wheat, sugarcane, and spices, the sector boosts GDP and creates many rural jobs. Due to their importance, farm tax regulations affect everything, and GST changed everything.

GST replaces indirect taxes to unify markets and simplify taxation. Its impact on primary cultivation and ancillary services must be evaluated to comprehend its role in GST agriculture. This article discusses India’s agriculture sector’s economic importance. It then describes GST’s objectives and economy. The GST’s agricultural exemptions, application, and GST impact on the agriculture sector on primary producers are studied.

GST agriculture-covered farming, compliance, and stakeholder consequences are also examined. A detailed GST rate research on agricultural items shows its finances. Understanding GST and agriculture reveals its benefits. GST has reduced agricultural product storage costs and facilitated transparent supply chains through the Input Tax Credit, relieving farmers of tax responsibilities and strengthening the system. 

What is GST?

Goods and services tax is known as GST. The GST was introduced to address the fundamental problems with India’s indirect tax code. The GST is used nationally to boost economic growth. The government collects GST on products and services to fund its administrative operations. GST went into effect July 1, 2017.

Also Read: What is GST? Overview and Services

Are Agricultural Products Subject to GST?

In India, the agriculture industry is largely free from GST. Essentially, fresh fish, dairy products, fruits, and vegetables are all considered agricultural goods and are not subject to GST. As a result, businesses in the agriculture sector that don’t process data are not concerned about GST.

Furthermore, businesses that just provide goods or services are exempt from GST and can choose not to register for it. Consequently, farmers are excused from paying GST on agricultural items if they sell their food in its freshest state. Moreover, farmers’ lives are made easier by the GST exemption for seeds.

Farming Activities under GST in India

Animal breeding, dairy farming, and poultry farming are all notably excluded from the scope of agriculture and are therefore taxable under the GST. Furthermore, the concept of agriculture has specifically prohibited the act of merely chopping wood or grass, gathering fruit, growing artificial forests, or raising seedlings or plants.

Consequently, these operations are also liable to GST, and the businesses engaged in farming operations must register for GST. However, after registering and filing a GST return, these businesses are also qualified to get an input tax credit.

GST Rates on Agri Commodities in India

The following GST rates apply to Indian farm commodities: 

  • Butter, ghee, butter oil, milk oils, and dairy spreads are subject to a 12% GST.
  • Fertilizer, an essential part of farming, was formerly taxable at 6%. The new GST system has reduced the duty on fertilizers to 5%.
  • GST of 12 percent is charged on phosphoric acid that is eligible for use as fertilizer. There is an 18% GST charge for pesticides.
  • The price of huge machinery used to create agricultural items is reduced with the help of GST. Thus, an 18% GST is applied to tractor production.
  • GST role in agricultural productivity used in agriculture that are liable to the 12 percent GST rate include water pumps, milking apparatus, and self-unloading trucks.

Rates were adjusted at the 47th GST Council Meeting. Find more details at:

  • GST Rate on Eggs, Honey, and Dairy Products Made from Milk
  • Why the commotion about GST on necessities exists: The coin’s two sides 
  • GST Exclusivity was withdrawn from a number of services and consumables

Also Read: GST Rate And HSN Code For Rice, Wheat And Other Cereals: A Complete Guide

Current Date Tax Laws

Certain foods are exempt from CENVAT, including rice, sugar, salt, wheat, and flour. Cereals and grains have a 4% state VAT tax applied to them. Under the existing tax regulations, agricultural products are subject to numerous licensing requirements as well as numerous indirect taxes (VAT, excise duty, service tax).

Currently, state value-added tax (SVT) is applied to all agricultural products in every state; it is applied before final consumption. Nonetheless, some unprocessed food items, including as meat, eggs, fruits, vegetables, etc., are exempt from state VAT.

National Agricultural Market(NAM)

The central government unveiled a plan to promote the National Agricultural Market (NAM). A National Agricultural Market is defined as providing all farmers and dealers in the regulated marketplaces with a unified e-commerce platform for an open, unbiased exchange of agricultural products.

There would be difficulties in implementing the NAM program because of the various state rules regarding VAT and the APMC (Agricultural Produce Market Committee).

To lay the groundwork for the successful implementation of NAM, GST is essential. Under the GST, the majority of the indirect taxes imposed on agricultural goods will be included. Every trader would receive an input credit under GST for the taxes they have paid on each value addition.

A hassle-free, transparent supply chain will result from this, allowing agricultural products to travel freely throughout India. The majority of agricultural products expire. The GST would strengthen the supply chain system and shorten the time it takes for interstate transit.

Farmers and retailers would profit from a shorter turnaround time. Charges for CST, OCTROI, and Purchase Tax bring in more than Rs 1000 crores for some Indian states, including Maharashtra, Punjab, Gujarat, and Haryana. The GST would include all of the previous levies. Therefore, compensation for the revenue loss would have to be given to these states.

GST on Agricultural Machinery

A 12% GST rate is applied on tractors, excluding semi-trailers, with a capacity greater than 1800 cc. A 28% GST charge applies to tractors for semi-trailers with a capacity greater than 1800 cc.

Positive Impact of GST on the Agriculture Sector

The GST system does not incorporate the tax on the storage of agricultural products. Farmers paid less tax as a result. It has also reduced the inevitable food waste that comes with storage and given farmers the chance to sell their produce for the best price possible. Starting a Cold Storage Business in India is a good place to start learning about the cold storage industry.

  • An Input Tax Credit is provided by GST to each retailer for the tax that was previously imposed on each addition. This facilitates the free flow of agri-food around the world by establishing an open, trouble-free supply chain.
  • GST role in agricultural productivity is vulnerable to damage and is affected by the length of the journey. The introduction of the Goods and Services Tax (GST) has helped the farm market because there is now only one tax rate that applies, which makes moving agricultural products more difficult.
  • A tax imposed on consumption is called GST. It is only collected if manufacturers promote agricultural products or if it is based on the output of commodities, as per the previously imposed excess tax.
  • There used to be multiple taxes levied on the intergovernmental trade of a single item. Every stage of their transaction required permissions and permits from other governments, which truly complicated the movement of commodities. GST has also made agricultural commodity marketing easier and more efficient.

Also Read: How GST Has Helped To Increase Agricultural Productivity?

Conclusion

As a result of GST adoption in India, the agriculture industry has changed dramatically. Agriculture is the backbone of the Indian economy, providing jobs and GDP, thus tax reforms must take this into account. The 2017 GST system exempts most agricultural goods, including fresh produce, dairy, and seafood. By relieving farmers involved in primary agricultural activities of the GST burden, this exemption has helped to create a more equitable and straightforward tax structure for this sector of the economy. Nonetheless, some farming operations—like dairy farming and animal breeding—come under the GST’s purview, underscoring the necessity of compliance in particular fields. The new GST rates on agricultural goods, like machinery and fertilizers, represent a changing tax environment that seeks to strike a balance between supporting farmers and generating income.

FAQs

  • Why Does the Indian Economy Depend So Much On The Agricultural Sector?

In addition to providing the majority of jobs in rural areas and contributing 16% of India’s GDP, the agricultural sector is essential to both social stability and economic prosperity.

  • What Is The Meaning Of GST And When Was It Started Applied In India?

On July 1st, 2017, India enacted the Goods and Services Tax (GST) to simplify taxation procedures and address underlying faults with the country’s indirect tax structure.

  • In India, Are Agricultural Products Subject To GST?

Fresh food and dairy products are often excluded from GST, which helps farmers who don’t process their products.

  • Which Farming Activities in India Are Charged With GST?

Activities that are not included in agriculture, such as raising chickens and dairy cows, are subject to GST and require registration and compliance.

  • What Are The Indian GST Rates For Different Agricultural Commodities?

The GST rates on dairy products and butter are 12%, those on fertilizers and phosphoric acid are 12%, and those on pesticides are 18%.

  • What Beneficial Effects Has GST Had on the Agriculture Sector?

With the Input Tax Credit, GST lowered agricultural storage levies, cut food waste, and gave farmers the tools they needed to maximize selling prices while fostering open global supply networks.

  • What Is India’s GST Rate on Tractors?

GST rates for tractors with a capacity greater than 1800 cc are 12% and 28%, respectively, for semi-trailers with a capacity greater than 1800 cc.

  • How Has The Transportation Of Agricultural Products Been Made Easier By The GST?

The consistent tax rate under the GST made agricultural shipping easier, which improved the commodities market’s efficiency and guaranteed smooth operations.

  • Does India’s Agricultural Product Tax Get Collected During The Consumption Phase?

Indeed, when manufacturers market agricultural products, GST is collected either at the output stage or at the consumption stage.

  • What Impact Has GST Had On The Marketing And Intergovernmental Trade Of Agricultural Commodities?

The Goods and Services Tax (GST) facilitated cross-border trade by removing redundant levies and authorization, promoting seamless agricultural commodity operations, and improving market efficiency.

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Moulik Jain
I am a seasoned marketer specializing in Tax, Finance, and MSMEs. I bring a wealth of hands-on experience to demystify complex subjects, providing insightful guidance for entrepreneurs and finance enthusiasts alike.

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