GST Exemption for Farmers 2022
To regulate the production and support farmers by doubling their income, the Government of India provided a GST exemption for farmers. India rates as one of the top farming countries in the world, producing a wide array of consumable products. The Government of India provides many schemes and subsidies to the farmers to meet the requirements of India. The Government of India also exports the products to countries abroad with the support of SMEs and MSMEs to produce quality products. India is the second-largest producer of rice and wheat in the world after China. This article looks at the benefits to farmers from GST implementation in India.
To regulate the production and support farmers by doubling their income, the Government of India provided a GST exemption for farmers. India rates as one of the top farming countries in the world, producing a wide array of consumable products. The Government of India provides many schemes and subsidies to the farmers to meet the requirements of India. The Government of India also exports the products to countries abroad with the support of SMEs and MSMEs to produce quality products. India is the second-largest producer of rice and wheat in the world after China. This article looks 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 the 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 purchases 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, are 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 are 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 plants 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.
