India is a country of farmers, and a sizable portion of its economy is derived from the agricultural sector. Small-scale agriculture is exempt from GST, and the majority of basic produce supplied in fresh form is also not subject to it, according to the Ministry of Finance. For large-scale farmers and businesses dealing in agriculture, however, GST registration and compliance may be required. In this essay, we take a close look at how the GST taxes impact agriculture.

Who practices agriculture?

According to the Act, a farmer is any person or Hindu Undivided Family who engages in land cultivation by any of the following methods:

  • Own labor, or
  • The labor of family
  • Servant labor hired labor overseen personally by a family member or under their personal control, and wages payable in cash or kind.

Only small farmers would therefore be excluded from GST compliance. If the aggregate turnover criterion or other GST registration requirements are met and the person sells items that are subject to GST, they must register for GST. This requirement applies to anyone who runs a business, LLP, or another type of entity for the purpose of engaging in agriculture. (Confirm whether GST registration is necessary.)

Does the GST Apply to Agriculture?

Only an agriculturalist is exempt from the requirement to register for GST insofar as they supply produce from land under cultivation. Only small farmers would therefore be excluded from GST compliance. Anyone who performs

  • A corporation,
  • LLP
  • Other kinds of entity

If the total turnover exceeds the exemption limit or other requirements for GST registration are met and they supply items that are subject to GST, they would need to register for GST for the purpose of doing agriculture.

  • What are the advantages of GST for business, trade, and farming?
  • The introduction of GST will contribute to the agriculture sector’s improvement in terms of transparency, trustworthiness, and dependability.
  • It will assist in putting in place a suitable supply chain system.
  • Reduced food waste would result from such a supply chain.
  • Reduce the expenses associated with transportation for farmers.
  • can aid in reducing the price of large agricultural gear.
  • Fertilizers, which were previously subject to a 6 percent tax under the GST system, are now eligible for ITC because their tax rate has increased to 12 percent.
  • Similar to this, tractors had a tax exemption that was increased to 12 percent under the GST, allowing farmers to claim ITC on the money they spent.
  • Additionally, fresh milk has been excluded from GST in the dairy sector, while skimmed milk is subject to a 5 percent margin.

Will Farmers Remit GST?

Many people active in formal agriculture or agricultural businesses may be liable for registration, collection, and compliance under GST since the Act only exempts an agriculturist as specified above from GST. Any person engaged in the agricultural industry who is registered for GST is also eligible to claim an input tax credit on GST paid, which they can use to offset their final GST due to the customer.

On the other hand, an agriculturalist who is not registered for GST is exempt from adhering to GST regulations. An agriculturist would still be required to pay GST on purchases that are subject to GST, though. For instance, the 12 percent GST rate is applicable to agriculturally utilized equipment like self-unloading trailers, milking machines, and water pumps. Therefore, an agriculturalist would pay GST when acquiring such items or services that are subject to GST.

A person is not required to seek GST registration if they are only engaged in the business of providing goods or services, or both, that are not subject to tax or are completely exempt from GST.

Goods derived from agriculture are exempt from GST.

  • Fresh, unprocessed vegetables and agricultural products, including dairy products, are now exempt from GST.
  • GST is not applied to fertilizers and seeds. As a result, farmers would not be required to pay GST tax on their primary input.

What services associated with agriculture are excluded from GST?

Agriculture service exemptions:

The following agricultural services are excluded from GST.

  • Plant Cultivation
  • Except for the rearing of horses, the raising of all animal life forms for use as food, fiber, fuel, or other comparable goods.

Or, agricultural processes

  • Such as planting, threshing, harvesting, plant protection, or testing that are directly related to the production of any agricultural produce.
  • Farm labor is available.
  • Processes done at an agricultural farm include tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling, bulk packaging, and similar operations that only make agricultural produce marketable for the primary market and do not change its essential characteristics.
  • Renting or leasing agricultural equipment or undeveloped land ancillary to its usage, whether or not it has a building on it.
  • Agricultural produce loading, unloading, packing, storing, or warehousing.
  • Services for agricultural extensions, such as research services.
  • Any agricultural produce marketing committee’s or board’s services include
  • Commission agent services for the sale or acquisition of agricultural goods.

Calculation of GST in Agriculture

  • Rice-related services such as loading, unloading, packing, storing, or warehousing.
  • Services such as pre-conditioning, pre-cooling, ripening, waxing, retail packing, and labeling of fruits and vegetables that do not modify or change their fundamental qualities.
  • Performing an Intermediate Production process as part of one’s job duties in connection with the cultivation of plants and the rearing of all animal life forms—aside from the rearing of horses—for food, fiber fuel, raw materials, or other agriculture-related products.
  • A Goods Transport Agency (GTA) offers its services through the transportation of agricultural goods.

GST for Agriculture Rates

The Ministry eliminated the GST on fresh, unprocessed vegetables and agricultural products, including dairy. As a result, any company that conducts its entire operation of providing goods, services, are both is eligible to petition for GST exemption. These companies have the option to forego GST registration.

Due to the fact that he or she would be considered a person engaged solely in the business of delivering commodities that are not due for tax or are entirely exempt from GST, even a formal farmer selling fresh fruit would not be required to register for or comply with GST.

GST Rate for Fertilizers & Seeds

For agriculturalists and farmers, seeds and fertilizers are important inputs. GST is not applied to seeds or fertilizers. As a result, farmers would not be required to pay GST tax on their primary input.

To know more about the Impact of GST on Agriculture you can contact PhoenixTax- one of the best GST consultant in Tambaram, Chennai.