कृषि पर जीएसटी का प्रभाव
The impact of GST on agricultural sector is foreseen to be positive. The agricultural sector is the largest contributing sector the overall Indian GDP. It covers around 16% of Indian GDP. The newly implemented indirect tax regime is influencing the agriculture industry and farmers due to the 5 percent GST rates on agricultural products.
It is expected that in long-term the industry is foreseen to be positive. The implementation of GST would have an impact on many sections of the society. One of the major issues faced by the agricultural sector is the transportation of agriculture products across state lines all over India.
It is highly probable that GST shall resolve the issue of transportation. GST may provide India with its first National Market for the agricultural goods. There are a lot of clarifications which need to be provided for rates for agricultural products. Special reduced rates should be declared for items like tea, coffee, and milk under the GST.
Current Tax Laws
There are certain food items like rice, sugar, salt, wheat, flour which are exempted from CENVAT. Under the state VAT, cereals and grains are taxed at the rate of 4%. Agricultural products go through a lot of licensing and a number of indirect taxes (VAT, excise duty, service tax) under the current tax laws.
State VAT is currently applicable to all the agricultural goods at each state, it passes through prior to final consumption. Although there are certain exemptions available from state VAT for certain unprocessed food products like meat, eggs, fruits, vegetables etc.
National Agricultural Market (NAM)
A scheme for the promotion of National Agricultural Market (NAM) is introduced by the central government. Involving all the farmer and traders in the regulated markets with a common e-commerce platform for a transparent, impartial trade of agri-commodities can be termed as National Agricultural Market. Due to the different state VAT and APMC (Agricultural produce market committee) law’s, implementation of NAM scheme would be challenging.
GST is crucial for creating a path regarding the successful implementation of NAM. Most of the indirect taxes levied on agricultural products, would be subsumed under GST. GST would provide each trader, the input credit for the tax paid on every value addition. This will create a transparent, hassle-free supply chain which would lead to free movement of agri-commodities across India.
Most of the agricultural commodities are perishable in nature. An improved supply chain mechanism due to GST would reduce the time taken for inter-state transportation. The benefit of reduction in time would be passed on to the farmers/retailers. Some states in India like Maharashtra, Punjab, Gujarat, Haryana earn more than Rs 1000 crores from charging CST/OCTROI/Purchase Tax. GST would subsume all the above taxes. Hence these states would need to be compensated for the loss of revenue.
Impact of GST on Agricultural Sector
GST is essential to improve the transparency, reliability, timeline of supply chain mechanism. A better supply chain mechanism would ensure a reduction in wastage and cost for the farmers/retailers. GST would also help in reducing the cost of heavy machinery required for producing agricultural commodities.
Under the model GST law, dairy farming, poultry farming, and stock breeding are kept out of the definition of agriculture. Therefore these will be taxable under the GST.
Fertilizers an important element of agriculture was previously taxed at 6% (1% Excise + 5% VAT). In the GST regime, the tax on fertilizers has been increased to 12%. The same impact is on Tractors. Wavier on the manufacture of Tractors is removed and GST of 12% has been imposed.
This is beneficial as now the manufacturers will be able to claim Input Tax Credit
India’s milk production in 2015-16 was 160.35 million ton, increased from 146.31mt in 2014-15.Currently, only 2% VAT is charged on milk and certain milk products but under GST the rate of fresh milk is NIL and skimmed milk is kept under 5% bracket and condensed milk is going to be taxed at the rate of 18%.
Tea is probably one of the most crucial items in an Indian household. The price of tea might also increase due to the tax rate of 5% under GST rate from the current average VAT rate of 4-5% with Assam and West Bengal with the exception of 0.5 and 1%.
- The agriculture sector would be exempted from undertaking GST compliances as well.
- All basic agriculture goods (not processed) which are not chargeable under current VAT Lawswould not be charged to tax in GST.
- Service taxalso exempts several services in relation to agricultural produce. But the definition of agricultural produce has always attracted disputes. Thus, the new definitions as per GST section 2(7) which defines agriculture and 2(8) which defines agriculturist holds importance with avoidance of further notification to not complicate the definition. As agriculturist would come under non-taxable person it holds importance to them as they would not be required to comply with GST compliances after falling into the above definition.
- Shortages in agricultural goods which are imported as domestic produce could not fulfill the requirement are charged with custom duty. As custom duty would not be subsumed in GST custom duty would continue. Hence, the exemption from basic duty on basic agricultural produce like pulses would continue.
- The main impact that GST in agriculture would bring is the inflation with currently 4% VAT being increased to 8% on many food items including cereals and grains as the exemption under VAT is limited to unprocessed food. The most affected from the inflation would be the consumers living below the poverty line.
An increase in the cost of few agricultural products is anticipated due to the rise in inflation index for a brief period. Though, implementation of GST is going to benefit a lot, the farmers/ distributors in the long run as there will a single unified national agriculture market. GST would ensure that farmers in India who contribute the most to GDP, will be able to sell their produce for the best available price.
*Rajendra Jangid, Mahendra and Narayan lal
Department of Agricultural Economics
*Swami Keshwanand Rajasthan Agricultural University, Bikaner