GST on Agriculture and its Related FAQs
Meaning of Agriculture Produce
‘Agricultural Produce’ as per the definition given in CGST Act, 2017, should necessarily have three essential elements:
(a) It must be a produce out of cultivation of plant and rearing of all life forms of animals.
(b) On which no further processing is done or such processing is done as usually done by a cultivator or producer which does not alter its essential characteristics i.e. produce must broadly retain its physical and chemical form/constitution.
(c) Most importantly the processing done should be such as is usually done by a cultivator or producer which should only help it to attain marketability at primary market i.e. the definition limits the scope of processing and allows only those activities which help the produces to attain the condition of its first marketability in primary market.
Once the products attains its first marketability for the primary market all other subsequent processes on produce leading to value addition and subsequent sale belong to the realm of secondary market, it makes the produce to fall outside the category of ‘Agricultural Produce’.
- Ginger is exempted from GST when it is sold by farmers/cultivators. Further drying and polishing of ginger is a specialized process not usually carried out by cultivator which converts them into dried ginger (Sonth, kirana item) hence changing the essential characteristic. It will be taxable.
- Similarly dates and dry dates also after being sold in primary market go under specific process of sorting, cleaning, drying and polishing which is not usually done by cultivator himself. Hence processed goods do not belong to produce which are being sold in primary market and processes involved lead to considerable value addition indicating change in essential characteristics. Hence, such goods do not fall under the definition of “Agricultural Produce’.
- If no further processing is done on above mentioned goods or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes marketable for primary market then the same would fall in the definition of agricultural produce and exemption would be available. However if any processing is done on above products as is not usually done by a cultivator or producer at farm level such as cleaning, sorting, Colour-sorting, grading, cutting, splitting, drying, packing etc. using specialized machine or equipment as is not usually done by a cultivator or producer at farm level, then it will fall outside the definition of agricultural produce.
Who are agriculturists?
The Act define an agriculturist as an individual or a Hindu Undivided Family who undertakes cultivation of land by:
- own labour, or
- the labour of family, or
- 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.
Is GST Applicable for Agriculture?
Only an agriculturist, to the extent of supply of produce out of cultivation of land is exempt from GST registration requirement.
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 exceeds the exemption limit or other GST registration criteria is satisfied and they supply goods that attract GST.
Will Agriculturist Pay GST?
As the 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. Any person involved in agricultural businesses and having GST registration would also be able to take input tax credit on GST paid and pass on the ultimate GST liability to the end consumer.
On the other hand, an agriculturist 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. 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.
Under GST, any person who is engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from GST is not required to obtain GST registration.
Agriculture produce Goods Exempted from GST
- Vegetables and produce from agriculture, including dairy, served fresh without any processing have been exempted from GST.
- Seeds and fertilizers are exempt from GST. Hence, agriculturists would not have to pay GST tax on their major input.
What are the services related to agriculture exempt under GST?
Exemptions related to Agriculture Services:-
- Agriculture services which are exempt under GST are as follows –
(a) Cultivation of Plants
(b) Rearing of all life-forms of animals, for food, fibre, fuel, raw material, or other similar products
(c) Except the rearing of horses.
- Or Agriculture produce by way of –
- Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing.
- Supply of farm labour.
- Process carried out at an agriculture farm including tending, pruning, cutting, harvesting, drying, cleansing, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market.
- Renting or Leasing of agro machinery or vacant land with or without a structure incidental to its use.
- Loading, Unloading, Packing, Storage or Warehousing of agriculture produce.
- Agricultural extension services i.e. research services.
- Services by any agricultural produce marketing committee or board of services provided by commission agent for sale or purchase of agricultural produce.
- Services by way of Loading, unloading, packing, storage or warehousing of rice.
- Services by way of Pre – conditioning, pre – cooling, Ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables.
- Carrying out an Intermediate Production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material, or other similar products or agriculture produce.
- Services provided by a Goods Transport Agency (GTA), by way of transport in a goods carriage of agricultural produce.
What is the GST rate on job work (Sorting, grading, cleaning etc ) done by Sortex Machine over agricultural produce (For eg, wheat, cumin etc.?
Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market will attract nil rate of tax.
But doing the above mentioned processes at a place, other than agricultural farm or using machine will attract GST @5% ( Ms Rara Udhyog, GST AAAR Rajasthan).
Is there any exemption on services provided to gram panchayat like borewel service where farmer used this borewell service to do his agriculture activity? What is the rate of GST on borewell service?
GST rate of tax is 18% for services which are not separately mentioned. Bore well is not mentioned in list, so the rate is 18%. Covered under 995434 @ 18%.
If services are provided to Gram Panchayat, GST is not applicable. As these are Local bodies of Government so Service by these bodies are Fully exempted as per exemption list of GST law.
We want to buy a agriculture land, it comes under gst or not?
GST is not applicable on buying or selling of land.
We are doing Job work of paddy to produce rice i.e. milling of paddy. So will it attract GST?
GST is not applicable on milling of Paddy. It is exempted.
The APMC (Agricultural produce market committee) who provides facility to traders to buy agricultural produces at single place, where APMC also provides Shops, Godown, etc to store such agricultural produces. Whether letting out Godown or Shop is covered under GST ?
Loading, unloading, packing, storage or warehousing of agricultural produce and services by any APMC (Agricultural Produce Marketing Committee) for sale or purchase of agricultural produce are exempted from GST.
An individual gives consultancy to farmers for their Crops like Grapes and other. He charged fee for consultancy to Farmers. So he is liable to pay GST?
Consultancy to farmers for crops falls under HSN 998611 and is exempted. It is support service to agriculture.
We are running E- commerce market place for fresh vegetable and fruit. We are serving as commission agent. Invoice the end customers, accept the payment, and pass the payment to farmers after deducting commission. Whether GST will be applicable, if yes at what rate?
This service is exempted. Please refer Notification No.12/17-CT(Rate) dated 28.6.17. Serial No.54 (g) refers.
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