Dr. Parveen Kumar
pkumar6674@gmail.com
Agriculture is very crucial sector for the country’s growth. With a contribution of about 17% to the country’s Gross Domestic Product (GDP); the sector still is a source of livelihood to around 50 percent of the population. Since independence, successive governments have been working to strengthen this sector through various policies, programme and by enacting various legislations. Last decade has witnessed many pro farm initiatives which have not only augmented production but also mobilized and empowered farming community including youths and farm women. Every year the renewed focus of government on agriculture and allied sectors is manifested through the Budgetry allocation to these sectors. The focus of the government thus lies in welfare of farming communities, agri-preneurs, various agro-based industries and all other stakeholders engaged in the upliftment of farming community.
The government relies on various types of revenue for public spending. For this it levies various types of taxes (Direct as well as Indirect) as a means of revenue generation. An important indirect tax is the Goods and Services tax (GST) which has replaced many indirect taxes in the country such as excise duty, Value Added Tax (VAT), services tax etc. After subsuming majority indirect taxes, GST is now the single domestic indirect tax law for the whole country. The GST Act was passed in the Parliament on March 29, 2017 and came into effect on July 0, 2017. It is widely seen as a tool to eliminate the cascading effect of taxes and to curb tax evasion as well as to increase the taxpayer’s base.
Recently, Government of India slashed the GST on various agricultural items. The GST which was previously as high as 18% was brought down to as low as 5%. It also has given a relief to industries that are agriculture related. A farmer now definitely is feeling relaxed from the burden of taxation. At the same time, the government’s move to reduce the GST in agriculture speaks in volumes of how seriously it is concerned about promoting farmers’ welfare and rural growth. The reform will not only cut costs for farmers but also help collective organizations like cooperatives and FPOs (Farmer Producer Organizations). Cheaper fertilizers and farm machines will raise productivity. Support for cold storage and food processing will reduce wastage and give farmers better returns. Dairy, honey and other allied activities will also become more profitable. These steps will make Indian farming stronger and more self-reliant, in line with the vision of Atmanirbhar Bharat.
Lower GST on tractors and farm equipment will make mechanization more affordable for farmers. More mechanization means more efficiency and timeliness of operations leading to more productivity. Let us see how the GST reduction will help promote use of machinery in agriculture. The GST on tractors (below 1800 cc) has been reduced from 12% to 5%. This will lead to a decrease in the cost of tractors by 40,000 to 60,000 depending upon the horsepower of tractor. Similarly, power tillers will now cost rupees 11,000 less as a result of new GST rates. The biggest price drop is in case of harvester. Farmers can save up to rupee 1, 87, 500 by its purchase whereas straw reapers are now cheaper by rupees 21,875.
GST on commercial goods vehicles (like trucks and delivery vans) has been reduced from 28% to 18%. GST on prepared and preserved vegetables, fruits, and nuts has been reduced from 12% to 5%. On farm machinery, the GST rate has been lowered from 12% to 5% for a range of machinery, including tractor parts like tyres, tubes, and hydraulic pumps, Sprinklers and drip irrigation systems, harvesting machinery, straw reapers and compost machines. The GST on Fixed Speed Diesel Engines of power not exceeding 15HP has also come down from 12% to 5%. In Dairy sector, GST on Butter, Ghee and milking can has come down from 12% to 5%. Similarly, in aquaculture, GST on prepared/preserved fish has also come down from 12% to 5% enabling a more no. of peoples to consume this nutritious food. GST on bio-pesticides and micronutrients has also been reduced, which will benefit farmers. This will also increase their inclination towards bio-fertilizers from chemical fertilizers. Ammonia, Sulphuric acid and Nitric Acid constitute major inputs for fertilizer production. The GST on these inputs has been reduced from 18% to 5%. This will help reduce production costs, help companies avoid passing price hikes onto farmers, keeping fertilizers affordable and demand steady. It thus means ensuring timely availability of affordable fertilizers, directly aiding farmers during sowing seasons.
GST on solar power-based devices has been reduced from 12% to 5% to lower irrigation costs. This means solar energy will now be available to the common masses at a more affordable price leading to lower upfront costs, and more and faster adoption of this renewable energy source. A 3 Kilo Watt rooftop system now costs around 10,000 less making is easier for the households to install. The price of an agriculture 5 HP solar pump costing about 2.5 lakh has now come down by rupees 17,000. The GST on iron, steel, and aluminum milk cans has been reduced from 12% to 5%. Kendu leaves (Diospyorus Melanoxylon) used for wrapping Bidis is a nationalized product like Bamboo and Sal seed. It is also one of the most important non wood forest products of states like Madhya Pradesh, Chattisgarh and Odisha. The GST rate on Kendu leaves has been cut from 18% to 5%. It positively impacts the supply chain especially for forest dependent communities by increasing their income security and making Bidi manufacturing cheaper. The reduction means a lower cost for Bidi manufacturers, potentially leading to higher margins for tribal rural families who are engaged in collection of Kendu leaves.
The reductions in GST are intended to make mechanization more accessible, reduce costs of various items and equipments thereby helping farmer especially small and marginal ones to purchase them and bring efficiency and precision in their farming operations ultimately resulting in improved productivity. Farmers certainly find these items more affordable. They now have the choice to access modern machinery through ownership or in shared use with various collective organizations.
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