The Goods and Services Tax (GST) Council is likely to consider a series of proposals to cut and abolish the tax slabs on food items, agricultural machinery and fertilisers, a move that could brighten the prospects of the farming sector. Farmers will benefit from both reduced prices of inputs and likely pick-up in consumption of food and cash crops.
Sources told FE that regarding several items including ultra-high temperature (UHT) milk, paneer, pizza breads, Khakhra , rotis and Parathas, there is a proposal to abolish the GST rates from the existing range of 5% to 18%. Food items including condensed milk, cheese, sausages, refined sugar, pasta, corn-flex and tender coconut, the 56th council meeting will discuss reducing GST slabs from existing 12% to 5%.
Tax relief for farmers’ key inputs
The GST council will also discuss reducing the GST slab from current level of 12% to 5% for agricultural equipment including fixed speed diesel engines, agricultural, horticultural or forestry machinery used for soil preparation, nozzles for drip irrigation equipment or sprinklers and composite machines.
The centre has also proposed reducing GST rates on fertiliser inputs including sulphuric acid, nitric acid and ammonia from 18% to 5% while there is a proposal to slash GST on micronutrients registered under the fertilizer control order from 12% to 5%.
Unprocessed agricultural products such as fresh fruits, vegetables, grains, pulses and milk are exempted from GST ensuring that farmers and consumers do not have to pay additional levies. The processed items like edible oils and dairy products attract different rates, in the range of 5% or 12%.
The Indian Vegetable Oil Producers’ Association recently stated that while edible oils attract 5% GST, most input materials such as packaging, chemicals, and processing aids fall under higher slabs of 12–18%. This leads to significant unutilized credit, straining the working capital of refiners, particularly MSME.
Industry seeks working capital relief
Industry body Fertilizer Association of India had earlier demanded lowering of GST rates on raw materials like ammonia and sulphuric acid to 5 % as well as a refund of accumulated input tax credit to the manufacturers. A delegation of the FAI recently met finance minister Nirmala Sitharaman and raised these concerns.
The association had stated that soil nutrients – phosphatic and potassic (P&K) at present attract a GST rate of 5 % but on the inputs for manufacturing these fertilisers such as ammonia and sulphuric acid attract a GST rate of 18 %.
“This huge blockade of unutilised input tax credit is seriously impairing the working capital of the Industry and their ability to source raw materials and finished fertilisers in time,” FAI had stated.
Tractor tyres and diesel engines for tractors may also tax reduction from 18% to 5%.