2025 GST Reforms in the Agriculture Industry

In the recently introduced GST reforms, the government has shown great interest in farmers’ welfare and growth. With a vision of “Viksit Bharat 2047”, the Next Gen 2.0 GST reforms aim to support farmers and develop India into a global food basket. The reform also shared the load of manufacturers and small businesses, who received relief in production costs and addressed their problems with inverted duty structures.

At the 56th meeting of the GST Council, the tax slab on the agricultural sector was reduced from 12% to 5%. This includes irrigation equipment such as nozzles, sprinklers, & drip systems, harvesting or threshing machines, hand pumps, composting machines, tractors, hand-propelled vehicles, trailers and others. Items such as irrigation pump engines, drip emitters, seed drills, beehive equipment, hand carts, ox carts, egg graders, mechanical sprayers, etc., are available at a reasonable price for end consumers.

For instance, suppose the cost of agricultural products such as a sprinkler head, cultivator, thresher, seed germinator and farm tractor is Rs 2,225,000; with the supply value at Rs 3,000,000, and an estimated profit of Rs 775,000. With the GST reforms, the final cost price dropped from Rs 2,492,000 to Rs 2,336,250 for manufacturers. It further leads to saving 7% amounting to Rs 155,750 for consumers. They can purchase agricultural products at Rs 2,844,250 compared to Rs 3,000,000 earlier.

Particulars	Amount (in Rs) (Before GST reforms)	Amount (in Rs) (After GST reforms)
Sale Value (A)	3,000,000	3,000,000
GST on Sale (B)	Exempt	Exempt
Total Sale Value (A + B = C)	3,000,000	3,000,000
Cost Price (D)	2,225,000	2,225,000
GST on Cost* (E)	267,000 (12%)	111,250 (5%)
Total Cost Value (D + E = F)	2,492,000	2,336,250
Profit (C – D = G)	775,000	775,000

Benefit of GST Rate Cut Passed to the Consumer [i.e., Saving from the GST Rate Cut] Rs. 267,000 – 111,250 = 155,750

The lower input costs benefited end consumers but also led to a competitive advantage for local manufacturers and retailers. Access to affordable farm machinery benefited the farmers, resulting in more demand for the equipment. This enhanced productivity and made trade smoother and efficient. Further, it contributed to resolving the inverted duty structure, which means the tax on inputs (raw materials) is more than the tax on the output (finished goods). The Next Gen GST settled the issues with Input Tax Credit (ITC), which could not be fully claimed by the business owners earlier. Additionally, GST reforms are making compliance simpler, encouraging less paperwork, and improving cash flow.

The far-reaching reward induced by lower GST rates in the agriculture industry is the adoption of modern farming practices. This encouraged sustainable farming and aided water conservation with the utilisation of effective tools and technologies in farming. The generalised change in GST tax slabs brought transformation in the agriculture sector by reducing the overall cost of cultivation. With the unwavering mission of ‘Atmanirbhar Bharat’, the government initiative to provide better tax facilities gives rise to upliftment and prosperity of the rural sector and consumption, adding value to the agriculture industry.

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2025 GST Reforms in the Agriculture Industry

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