Last updated: January 27th, 2024 5:39 PM

Agriculture under GST - Registration Requirement & GST Rates

India is a nation of farmers with the agriculture sector contributing a large chunk of the economy. The Ministry of Finance exempted GST for Small scale agriculture and most of the basic produce sold in fresh form does not attract any GST. However, GST registration and GST compliance may be mandatory for large scale farmers and companies involved in agriculture. In this article, we look at the taxation of agriculture under GST in detail.

Is GST Applicable for Agriculture?

According to the GST Act, only an agriculturist, to the extent of supply of produce out of cultivation of land is exempt from GST registration requirement. Further, the Act goes on to define an agriculturist as an individual or a Hindu Undivided Family who undertakes cultivation of land:

• By own labour
• By the labour of family
• By servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

Hence, only small agriculturist would be exempt from GST compliance. Any person who operates a company or LLP or any other type of entity for the purpose of undertaking agriculture would be required to obtain GST registration if the aggregate turnover criteria or other GST registration criteria is satisfied and they sell goods that attract GST. (Check if GST registration is required)

Will Agriculturist Pay GST?

As the GST Act exempts only an agriculturist as defined above from GST, many involved in formal agriculture or agricultural business can be liable for registration, collection and compliance under GST. As GST acts as a consumption-based tax, any person involved in agricultural businesses and registered for GST can apply for availing input tax credit on GST paid and pass on the ultimate GST liability to the end consumer. On the other hand, an agriculturist as per the GST Act not having GST registration would not be required to comply with GST requirements. However, an agriculturist would still have to pay GST on purchases which attract GST tax. For example, 12% GST rate is applicable on items like water pump, milking machines and self-unloading trailers used for agricultural purposes. Hence, an agriculturist would be making GST payment while purchasing such goods or services which attract GST. Click here to read on HSN and GST Rate for Paper Pulp, Wood Pulp under HSN Chapter 47

GST Rates for Agriculture

The Ministry exempted GST for Vegetables and produce from agriculture, including dairy, served fresh without processing. Therefore, any business engaged exclusively in the business of supplying goods or services or both can apply for GST exemption. These businesses can also opt-out of GST registration. Hence, even a formal farmer selling fresh produce would be exempt from GST registration or compliance, as he/she would fall under the category of a person engaged exclusively in the business of supplying goods that are not liable to tax or wholly exempt from GST.

GST Rate for Seeds & Fertilisers

Seeds and fertilisers are a major input for agriculturist and farmers. Both seeds and fertilisers are exempt from GST. Hence, agriculturists would not have to pay GST tax on their major input. Know more about GST rates for agriculture.