SABC seeks Exemption of GST on Farm Inputs to Reduce the Financial Burden of Smallholder Farmers

The South Asia Biotechnology Centre, a not-for-profit Scientific organization recently reached out to the Hon'ble Union Finance Minister Smt. Nirmala Seetharaman to request exemption of Goods and Service Tax (GST) on-farm inputs such as botanical, biological, pheromone trap & lure, micronutrients, fertilizers, pesticides, tractor, drip/sprinkler irrigation systems or other agricultural equipment.

Smallholder farmers engaged in the production of cereals, pulses, edible oilseeds, fruits & vegetables and other commodities pay about Rs 14,500 crore of GST annually on-farm inputs. These farm commodities feed 135 crore Indians and also contribute significantly to the export of agriculture and processed food products. Unfortunately, farmers are the only businesspeople today who cannot claim tax credit input and cannot set it off on the sale of his/her produce. The input tax credit is a GST mechanism that allows the manufacturers/producers to adjust GST tax on inputs against tax liability on output.

“The inability of farmers to claim input credit tax paid on-farm inputs violates the spirit and foundational principles of the GST system in India,” alluded Bhagirath Choudhary, founder-director of South Asia Biotechnology Centre (SABC), New Delhi. The smallholder farmers should, therefore, be provided with fair treatment in virtue of GST principles as they purchase farm inputs for raising crops, and do not consume them as final goods. Therefore, there must be a mechanism for availing input tax credit, added Mr Choudhary.

This is in line with the GST principle that goods and/or products consumed as intermediaries are eligible for the input tax credit. Hence, the GST exemption on farm inputs shall be exempted in line with an exemption granted on seeds, animal & poultry feed - other two critical farm

Apparently, the issue of GST came into light while implementing the project on fall armyworm, a voracious pest that has become a serious threat to maize production in India.

On the purchase of pheromone trap & lures, which are meant for monitoring of FAW adult male – a critical step in determining the economic threshold level (ETL) for farmers to implement control measures, we were shocked to pay 18% GST, which was a trigger to look into GST on other farm inputs. To our conservative estimates, as tabulated below, farmers in India pay a hefty GST on farm inputs costing them about Rs14,500 crore annually.