Government wanted to impose one tax one nation. The introduction of GST was the step taken by the Government, as the tax was imposed the, while working many flaws were visible. To correct those flaws Government time to time changing the slabs of the GST for certain items. Now in the 31st meeting on 22nd December the main issue was the Agriculture.
Hoping the new slabs may be helpful for the people trading in the agriculture produce and products. The farmers may also be benefited through these. GST Council had given the detailed overview of these taxes imposed and reduction as suggested.
Majority of the indirect duties levied on agricultural products have been absorbed under the GST Rate on Agriculture. This allows every farmer, trader, and cultivator to receive the input credit for the tax paid on every value addition, thus, creating a transparent, hassle-free, and convenient supply chain.
National Agricultural market (NAM) is a national scheme introduced by the central government. It provides all the farmers and traders in the markets with a singular and uniform e-commerce platform for a transparent and impartial trade of agri-commodities. Prior to the GST effect on the Agriculture Industry, the implementation of NAM scheme was challenging due to non-uniform and variable state VAT and APMC (Agricultural produce market committee) laws.
Before the implementation of GST on Agriculture, certain food items like rice, sugar, salt, wheat, and flour were free from paying taxes under CENVAT. Also, agricultural products went through numerous licensing processes earlier. Thus, a number of indirect taxes (VAT, excise duty, service tax) were applied under the previous tax laws. Under the state VAT, cereals and grains were taxed at the rate of 4 percent.
However, there have also been huge Advantages of GST on Agriculture - As after GST has been levied, a successful path for the establishment and implementation of NAM has also been created.
Moreover, this has led to the free and quick movement of agri-commodities across different state borders within India.
Fertilizers- Earlier, fertilizers were subjected to a 0-8 percent VAT which, after GST, will attract 12 percent tax. This has increased the prices of fertilizers by 5-7 percent.
Pesticides- Pesticides have been put in the 18 percent tax slab, increasing from the pre-GST 12 percent duty and VAT of 4-5 percent in some states.
Tractors- Tractors have been placed in 12 percent excise slab, while several of its components and accessories have been put in the 28 percent slab.
Pumps- GST rate on pump sets has been decreased to 18 percent from 28 percent , thus, reducing manufacturing costs and driving sales indirectly.
Agri-Commodities- Highly used agri-commodities such as rice, wheat, milk, fresh fruits, and vegetables are placed in the zero tax slab. This helps in evading tax, cess, and Arhatiya commission imposed by some States.
Fresh Produce- Fresh fruits and vegetables are not subject to any taxes. However, higher rates of 12 percent and 18 percent have been introduced for dry fruits and preparations from fruits and vegetables, such as fruit jellies, pastes, jams or juices which were taxed at a rate of 5 percent earlier.
Frozen Produce- Frozen or chilled fruits and vegetables whether cooked or uncooked, preserved fruits, vegetables and nuts, and areca nuts are taxed at 5 percent.
Processed Produce-processed foods like fruit and vegetable juices under GST will be taxed at 12 percent , up from 5 percent . Some items like fruit jams, jellies, marmalades, etc. will be taxed even higher at 18 percent.
After the implementation of GST, all farmers, traders, and cultivators are liable to pay taxes. So, the earlier category of people who were exempt from taxes no longer exists under GST. Also, it saves the agricultural workforce from paying the service tax under the GST implementation laws and guidelines. Along with this, most non-processed agricultural and cultivated products have also been exempted from taxation.
Initially, in the immediate aftermath of GST implementation, various states like Maharashtra, Punjab, Gujarat, Haryana, etc., will face quite a bit of revenue loss. The revenue, which was earlier generated by charging CST/OCTROI/Purchase Tax, will be compensated to the respective states.
But, implementation of GST taxes is going to benefit a lot of farmers, traders, cultivators, and distributors, in the long run, owing to its creation of a single unified national agriculture market. It is designed for farmers to sell their produce for the best available price.
