Benefit to Farmers from GST
India is among the top farming countries in the world, producing a wide array of produce for consumption by the people of India and exports. India is the second largest producer of rice and wheat in the world after China. With the GST set to change the indirect tax system of India, farmers will be impacted by GST rollout. In this article, we look at the benefits to farmers from GST implementation in India.
Farmers Do Not Need GST Registration
According to the GST Act, agriculturists have been exempted from GST registration or compliance requirements. The term agriculturists has been defined in the GST Act as:
“Agriculturist” means an individual or a Hindu Undivided Family (HUF) who undertakes cultivation of land
- By own labour, or
- By the labour of family, or
- By servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.
Hence, based on the above definition it must be inferred that only farmers involved in the cultivation of land who are individuals or a HUF are eligible for GST exemption. Further, the farmer must also cultivate the land by his own labour, by the labour of his/her family or through hired labour under personal supervision. Thus, any company or LLP or Corporation involved in farming or agricultural activities would not be exempted from GST compliance requirement.
Farmers Need Not Collect GST
Since GST can be collected by only taxable persons having GST registration and most farmers would not have GST registration, they would not be liable for collecting and remitting GST to the Government.
Farmers Do Not Need GST Filing
Compliance under GST and GST filing is necessary only for taxable persons under GST, having GST registration. Since, most farmers in India would be classifiable as an agriculturist under the GST Act, GST filing would not be necessary.
No GST for Seeds
Farming would require the purchase of seeds for planting and cultivation. Under GST, seeds required for cultivation by agriculturists in India have been placed in the NIL category. Hence, GST would not be applicable on seed purchase by farmers.
GST Rate for Fertilisers
The GST rate is NIL for organic manure which is not put up in unit containers and bearing a brand name. Other fertilisers are taxed at 12% under GST.
GST Rate for Agricultural Tools
The following types of agricultural tools have been kept in the NIL GST rate category:
- Agricultural implements manually operated or animal driven
- Hand tools, such as spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry.
The following types of agricultural tools have been kept in the 5% GST rate category:
- Hand pumps and parts
- Solar water heater and system
- Waste to energy plants/devices
- Solar lantern/solar lamp
The following types of agricultural tools have been kept in the 12% GST rate category:
- Power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps.
- Agricultural, horticultural or forestry machinery for soil preparation or cultivation; lawn or sports-ground rollers.
- Milking machines and dairy machinery.
- Composting Machines.
- Self-loading or self unloading trailers for agricultural purposes.
- Other agricultural, horticultural, forestry, poultry-keeping or beekeeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators and brooders.
- Harvesting or threshing machinery, including straw or fodder balers; grass or hay mowers; machines for cleaning, sorting or grading eggs, fruit or other agricultural produce.
The following types of agricultural tools have been place in the 28% GST rate category:
Ceramic wares for laboratory, chemical or other technical uses; ceramic troughs, tubs and similar receptacles of a kind used in agriculture; ceramic pots, jars and similar articles of a kind used for the conveyance or packing of goods.
Find GST Rate and HSN Code for agricultural products.
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