India: Seed firms see anomaly in GST levy on cereals

Seed companies selling paddy, maize (corn) and millet (bajra) are perplexed over the levy of 5 per cent Goods and Services Tax (GST), which they say is an anomaly.

Under the new norms, seeds, fruits and spores of the kind used for sowing are exempt from GST under Chapter 1209, but there is no specific mention of paddy, maize and millet.

Instead, these are covered in Chapter 10, which levies 5 per cent GST on cereals sold in containers and bearing a registered brand name.

GST Council briefed

Many seed producer associations have highlighted the anomaly to the GST Council and sought exemption from GST on ‘seeds meant for sowing’ covered under Chapter 10.

V Shankar, Managing Director and CEO, Rallis India, said the company charges 5 per cent GST on rice, maize and bajra, as do other companies associated with the Federation of Seed Industry of India. But there is no levy on cotton and vegetable seeds.

However, he said, some seed companies have taken a stand that maize, rice, millet and sorghum are covered under HSN (Harmonised System Nomenclature) code 1209 meant for seeds, fruit and spores of a kind used for sowing and are not charging GST.

As the kharif season looks bright with widespread coverage of the South-West monsoon, the government would do well to clear the confusion as it would also impact farmers’ earnings, Shankar said.

The varying tax treatment on cereal seeds adopted by companies has led to differential pricing by distributors, said Santosh Garade, a farmer growing bajra at Ahmednagar in Maharashtra.

GST on crop protection

The government decision to levy 18 per cent GST on crop protection has come as a rude jolt to the farming community, which is reeling under rising costs and the vagaries of the weather.

“Earlier, crop protection used to attract 16 per cent tax, and while considering GST, the government may have fixed it at 18 per cent, the nearest slab. We hope it will be revised lower,” said Shankar.