Effect of Goods & Services Tax (GST) on the Indian Agricultural Sector - By Egniol

Effect of Goods & Services Tax (GST) on the Indian Agricultural Sector

Indian Agricultural Sector & GST

Ever since GST was implemented across India in 2017, it created quite a stir as to how would things work, how it would impact various sectors, how would people get GST credit, and how it would reduce indirect taxes. Today we look at 2017 to 2022 how it has affected the Indian Agricultural Sector.

GST in India

To first understand the impact of GST we need to understand what is GST, the agriculture in India and then GST’s mark on it. In a nutshell, GST is Goods & Services Tax which went live in 2017 after a series of board meetings, the process of implementation and amendment bills. After the approval of Lok Sabha & Rajya Sabha, this new tax system was implemented to reduce a range of indirect taxes such as Value Added Tax (VAT), Service Tax, Purchase Tax, Excise Duty and so on which were being levied from the people. So, it is 1 tax that is applicable all over India.

Agriculture in India

The agriculture sector is crucial to the growth of the Indian economy. Rice, wheat, sugarcane, and spices are just a few of the agricultural products that India produces and exports to other countries. Agriculture is one of the key businesses providing employment in rural India. Consequently, taxation on the agricultural industry is quite important to the economy. The greatest contributor to India’s overall GDP is the agriculture sector. It accounts for roughly 16% of the Indian GDP.

In India, the agriculture industry is largely excluded from the GST. In essence, agricultural products including fresh seafood, dairy, fruit, and vegetables are exempt from the GST.

Positive Impacts of GST on Agri-Activities

Effect of Goods & Services Tax (GST) on the Indian Agricultural Sector - By Egniol

1. Better Supply Chain
Under the new regulations, no tax will be levied on the storage, which will lower the farmers’ tax burden. It also has reduced food waste associated with storage tax and has provided farmers with the opportunity to sell their goods at a good price.

2. Input Tax Credit with Tax Exemption
Each dealer is provided with an Input Tax Credit (ITC) for the tax previously levied for each addition. This creates a transparent and hassle-free system while the movement of agri-food. The previously imposed surplus tax is only collected (on consumption) if agricultural products are marketed by manufacturers or on the output of goods.

3. Reduced Transportation Time
As agricultural products are perishable, their transportation plays a vital role while distributing them. As a single tax rate has been imposed, it should empower and strengthen as now transporting has become convenient.

4. Intergovernmental Trade Made Easy
Earlier during intergovernmental trade, a lot of permissions and licences were required from states and which made every transaction difficult. This led to a lengthy process and there were complications when agricultural products needed to be transported. Because of GST, a lot of loopholes in this process have now gone, making the trade of such items very smooth.

Future Plans to be Achieved by GST

Effect of Goods & Services Tax (GST) on the Indian Agricultural Sector - By Egniol
  1. The overall aim of GST has lessened the burden on the agricultural industry. However, the government has had to increase taxes on items like fish, meat, chicken, dairy products, condensed milk, dried fruit, jellies, and other items. With time, the government plans to reduce taxes on the same, so there’s a balance maintained.
  2. The building cost has marginally increased because of 18% GST but on the other hand, people would be paying less tax overall.

Conclusion

Numerous indirect taxes, particularly agricultural taxes, were reorganised as a result of this unified tax. Farmers are allowed to sell agricultural products under the same tax structure on numerous markets and in several states, and hence the GST structure is essential to enhancing the agricultural sector.

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