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GST Exemption for Farmers


GST Exemption for Farmers

To regulate the production and support farmers by doubling the income, the Government of India (GoI) provided GST exemption for farmers. India rates as one of the top farming countries in the world, producing a wide array of consumable produce. The GoI provides many schemes and subsidies to the farmers to meet the requirements in India. The GoI also exports the products to countries abroad with the support of SMEs and MSMEs aimed at producing products with quality. India is the second-largest producer of rice and wheat in the world after China. 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 GST Act defines the term agriculturists as:

“Agriculturist” means an individual or a Hindu Undivided Family (HUF) who undertakes cultivation of land

  • By own labour,
  • Through 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 labour, by the labour of his/her family or through hired labour under personal supervision. Thus, the compliance to file GST shall apply to any company, LLP or Corporation involved in the farming or agricultural activities.

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 apply to seed purchase by farmers.

GST Rate for Fertilisers

The GST rate stands NIL for organic manure until packed in unit containers and bearing a brand name. Al the other fertilisers under the GST, taxed at 12%.

GST Rate for Agricultural Tools

The NIL GST rate category applies to the following types of agricultural tools:

  • 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.

5% of the GST rate category applies to the following types of agricultural tools:

  • 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 placed in the 28% GST rate category:

Ceramic wares for laboratory, chemical or other technical uses

Tubs, ceramic troughs, 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 the GST Rate and HSN Code for agricultural products.