It is more like stating the obvious if said, agriculture is the most important part of the Indian economy. India, after all, is known as the land of farmers and ranks second worldwide in farm output. It is a matter of importance to know how GST impacts agriculture. Although agriculture is kept out from the preview of GST, its effects are crystal clear. Dairy farming, poultry farming, and stock breeding are not considered a part of agriculture, hence, are taxable under GST.
Agriculturists, for the purpose of agriculture, are not required to register under GST, yet, it has a high impact on this sector as the basic necessities of farmers are taxed. The fertilizers are charged at a rate of 12%, which under VAT was in between 0-8%. Pesticides are kept under 18% slab as per the new GST regime, earlier excise duty of 12% in addition to VAT up to 4-5% in some states was imposed. Tractor and its’ spares are being charged differently, it’s components @28% and tractors themselves are under 12% slab, up from 4-5% of VAT. pumps & accessories, same as tractor spares, have been put under 28% slab.(financial express) A most important point which can never be neglected is that the farmers are not registered for GST so they get no Input tax credits. (Input tax credits are the solution to doubling of taxes. It is not justifiable to impose tax on the same product twice, so the tax paid by the business can be reimbursed if the supplier is registered under GST)
Most raw agro-commodities such as rice, wheat, fresh fruits, and vegetables are in zero slabs, While, fruit and vegetable juices will be taxed at 12% and fruit jams, jellies, marmalades, fruit and vegetable purees, etc. will be taxed at 18%. Punjab which contributes maximum grain to the central pool earlier imposed a tax up to 12%, where now 12% decrement of tax is expected (Business Line- The Hindu). The exemption of mandi taxes can be said as the biggest gain from GST. though the exemption of tax on services of arhtiya might need some clarifications.
It is believed that short term obstacles in the implementation of GST can create inflation and increase the input cost but in long term it might benefit farmers by easy movement of commodities, integrating markets and better prices for produce.