India farm sector hit hard by GST

A month after the Goods and Services Tax (GST) kicked in, the farm sector is feeling the heat, with stakeholders saying the cost of cultivation has gone up and farmers may find their profession unviable.

The biggest blow comes in the rate of tax on electrical agricultural appliances that have been classified under the highest tax slab, along with luxury and goods such as tobacco, soft drinks and fast food and air-conditioners.

The appliances such as agriculture motor starters, agriculture submersible pump starters, fuse units and allied switchgears used by farmers have been classified under the 28% GST slab. These equipments earlier attracted an effective tax burden of 17.5 % that included 5.5% Value Added Tax and 12.5% excise duty.

"The new tax rate on agri-electricals has dealt a body blow to both the farm sector and the small-scale industry manufacturing units these appliances," Ratnaraj Pirgal, taxation committee head, Bengaluru Switchgear Manufacturers Association (BSMA).

The new tax burden comes at a time when farmers in Karnataka are staring at the fourth successive drought year. The input cost of cultivation has gone up because of the increase in tax burden on various other commodities apart from electrical appliances. The drip and sprinkler irrigation equipment, which attracted 5% VAT, has been taxed at 18% in the GST regime. The tax burden on pesticide sprayers has gone up from 6% to 18%.

The price of a 50-kg bag of urea has been increased from Rs 298 to Rs 334. Similarly, the cost of other fertilizers like di-ammonium phosphate (DAP) and potash has gone up by Rs 224 and Rs 70 respectively.

"We are perturbed by this taxation. Instead of supporting the farm sector, the government has unscientifically hiked the tax burden on farmers," said Kuruburu Shanthakumar, president, All-India Sugarcane Growers Association.

He pointed out that government policies are doing little to help distressed farmers. For instance, the support price fixed for 1 quintal of rice is between Rs 750 and Rs 900, while the cost to produce is more than Rs 1,000. "The cost to produce has been further increased due to GST. It'll worsen the situation where farmers are resorting to suicide," Shanthakumar added.

Jayant Mutha, office-bearer, BSMA, said his association has sent representations to both the Union finance minister and GST Council seeking reduction of GST rate on electrical farm appliances. "We demand the capital goods and commodities used in the farm sector should be taxed at the lowest at 5%," Mutha said.

"The GST Council has received many representations seeking revision of tax rates. The council will discuss them in its next meeting on August 5," said Ritvik Ranjanam Pandey, commissioner of commercial taxes and secretary (finance).