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The agriculture industry is a big part of how the Indian economy grows. India is one of the best places in the world to grow and sell agricultural products like rice, wheat, sugarcane, and spices. In rural India, agriculture is one of the most important industries that hire people. Because of this, taxing the agriculture sector is a very important part of the economy. India’s Goods and Services Tax (GST) went into effect in 2017, and it has a big effect on all parts of the economy, including agriculture. This article will help you figure out the impact of GST on the agriculture sector .
Importance of Agriculture Sector
The agriculture sector makes the biggest contribution to India’s GDP as a whole. It makes up about 16% of the Indian GDP. Because of this, putting the GST on agriculture would have an effect on many parts of society.
What is GST?
GST means the tax on goods and services. The GST was put in place to fix the main problems with India’s indirect tax laws. The main goal of using the GST on a national level is to help the economy of the whole country grow. GST is a tax that is put on goods and services to help the government get the money it needs to do its administrative work well. On July 1, 2017, the GST began to be used.
Is there GST on Agricultural Products?
In India, the agriculture sector is mostly exempt from GST. Basically, there is no GST on agricultural goods like fresh seafood, dairy, fruit, and vegetables. Because of this, businesses in the agriculture industry that don’t do processing don’t have to worry about GST. Also, companies that only sell goods or provide services don’t have to pay GST and don’t have to sign up for it. So, farmers who sell their food when it is at its freshest don’t have to pay GST on agricultural goods. Also, seeds are not subject to GST, which makes life easier for farmers.
Farming Activities under GST
Since dairy farming, raising chickens, and breeding animals are not included in the definition of agriculture, GST taxes are applied to them. The simple act of cutting grass or wood, picking fruit, growing artificial forests, or making seedlings or plants has also been explicitly left out of the definition of agriculture. This means that these activities are also subject to the GST, and companies that do these things have to get GST Registration. But these companies can also get input tax credit once they have registered and filed their GST Return.
GST Rates on Agri Commodities
A 12 percent GST applies to butter and other fats like ghee, butter oil, and oils made from milk, as well as dairy spreads.
Before, a 6% tax was put on fertiliser, which is an important part of farming. Under the new GST system, the tax on fertilisers has been lowered to 5%.
A GST of 12 percent is put on phosphoric acid that can be used as fertiliser. Pesticides are subject to an 18 percent GST levy.
GST helps bring down the cost of big machines used to make agricultural goods. So, an 18 percent GST is added to the cost of making tractors.
Self-unloading trucks, milking equipment, and water pumps are all used in farming and are subject to the 12 percent GST rate.
At the 47th GST Council Meeting, which took place not too long ago, some rates were changed. You can learn more about this by going to:
GST Rates for Milk, Cheese, Eggs, and Honey
What’s up with all the fuss about GST on essentials: There are two sides to every coin.
GST Exemptions Withdrawn on a number of goods and services that people use up
GST on Agricultural Machinery
If a tractor’s engine size is more than 1800 cc and it’s not a semi-trailer, the GST Rate is 12%.
The GST rate for semi-trailer tractors with an engine size of more than 1800 cc is 28%.
Positive Impact of GST on agriculture sector
The tax on storing agricultural goods is not part of the GST system. As a result, farmers paid less tax. It has also cut down on the inevitable food waste that comes with storage and given farmers the chance to sell their goods for the most money possible. Start Cold Storage Business in India has information about the Cold Storage business.
GST gives each merchant an Input Tax Credit for the tax that was paid on each addition before GST. This makes it easier for agri-food to move around the world by making the supply chain clear and free of problems.
Farm goods can be damaged and are affected by how long it takes to transport them. The farm market has gotten better since GST was put into place. This is because there is now only one tax rate, which makes it harder to transport agricultural products.
GST is a tax that is put on things that people buy. It is only collected if, according to the excess tax that was put in place before, agricultural products are sold by manufacturers or if it is put on the output of goods.
Several taxes used to be put on the intergovernmental trade of a single item. At every step of their transaction, they had to get permission and licences from different states. This made it hard to move goods from one place to another. The implementation of GST has also made it easier to sell agricultural goods and made it possible for them to run smoothly.
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