GST may benefit farmers from states like Karnataka but not Punjab

India

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While apprehensions continue on whether Goods and Services Tax will affect the already suffering farming sector, numbers comparing earlier tax regime and the GST regime show that the farmers in many states including Karnataka, may have reason to smile.

GST on agricultural inputs may be lower than the previous regime that included VAT and Central Excise but it may be the opposite for states where farmers paid no tax for chemical fertilisers and no value-added-tax on pesticides. While farmers across the country benefited so far from inter-state price differentials, they will have to forego the same thanks to nationwide uniform GST rates.

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Karnataka's agriculture minister Krishna Byregowda, who is a part of GST Council told reporters on Thursday how the GST regime was beneficial for the farmers inc comparison to the previous tax regime. Tax percentage on agricultural inputs, at least for farmers in Karnataka, will see a dip with GST except for power-driven agricultural implements which will increase to 12 percent from current 5.50 percent. Instead of VAT plus Central excise on input that pegged taxes at 18 percent for most products, GST has brought it down to 12 percent. Tax percentage on pesticides, however, remain unchanged. Here is how the cost of agricultural inputs will look like after GST roll out for farmers in Karnataka.

Earlier Regime GST Agricultural Inputs VAT Central Excise Total Chemical Fertilisers 5.50% 12.50% 18.00% 12% Pesticides 5.50% 12.50% 18.00% 18% Agricultural Labour 0% 0% 0% 0% Sowing seeds 0% 0% 0% 0% Tractors 5.50% 12.50% 18.00% 12% Pump sets and Motors 5.50% 12.50% 18.00% 12% Agricultural Implements Manually operated 0% 0% 0% 0% Agricultural Implements-power driven 5.50% 0% 5.50% 12%

The situation, however, is unlikely to be the same for farmers in states like Punjab and Haryana where pesticides do not have VAT and fertilisers are tax-free. Farmers here will have to cough up more with fertilisers being pegged at 12 percent and pesticides at 18 percent. Pesticides in Haryana and Punjab currently attract an excise duty of 12.5 percent. Under the GST it is 18 percent, an additional 5.5 percent on the existing stock. This may improve as fresh stock with GST rates enters the market.

Prices of pre-stocked fertilisers post GST rollout has been a primary concern for the industry. While the industry stakeholders including fertiliser firms are sure that farmers will not pay more than the printed MRP, lack of clarity continues to bother many. In the long run, however, GST may, in fact, turn beneficial to farmers especially on the Chemical fertiliser, tractors, pump sets and motors, front. Power-driven agricultural implements will cost higher with 12 percent tax as against the current 4-7 percent.

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