GST council slashes rates on agriculture and related goods, offering a lifeline to farmers and manufacturers. This move aims to boost consumption and domestic production, making farming more affordable and encouraging self-reliance.
In a landmark decision, India’s GST Council has announced a sweeping overhaul of the country's tax structure, with a major focus on the agriculture sector. The council has reduced the existing four-tiered GST system to just two main slabs: 5% and 18%, alongside a 40% rate for "sin goods." This restructuring is expected to have a profound impact, lowering cultivation costs for farmers.
The most significant changes are seen in the agriculture and allied industries, where many essential goods have been moved to the lowest 5% tax slab. Tractors with engines below 1800 cc, along with their parts like tyres and hydraulic pumps, will now attract 5% GST, a sharp reduction from the previous 18%.
Similarly, the GST on harvesting and threshing machinery, sprinklers, and drip irrigation systems has also been cut from 12% to 5%.
The fertilizer industry, which has long grappled with an "inverted duty structure," has received a significant boost. The GST on key raw materials such as sulphuric acid, ammonia, and nitric acid has been reduced from 18% to 5%. This change aligns the tax rate on inputs with the 5% tax on finished fertilizers, eliminating a major pain point for indigenous manufacturers, particularly Micro, Small, and Medium Enterprises (MSMEs). This rate alignment will now ensure smoother cash flows and allow manufacturers to focus on production rather than tax-related bottlenecks.
The benefits extend beyond farm machinery and fertilizers. Processed food products have also seen significant tax cuts, with items made from fruits, vegetables, and nuts moved from 12% to 5% GST.
To support farmers in transitioning to sustainable energy, the GST on solar power equipment has also been lowered from 12% to 5%. This move is aimed at enabling more solar-powered farms and reducing reliance on conventional energy sources. Furthermore, the GST on commercial cargo vehicles has been reduced from 28% to 18%.
The GST Council's decision, which comes eight years after the implementation of the tax regime, is seen as a strategic move to stimulate the domestic economy. With a feared fall in exports due to global trade tensions, the reduction in taxes is expected to boost domestic consumption and help cushion the economic impact.
