Goods and services tax, also known as GST, is a tax applied to the manufacturer's supply of goods and services to the consumer. The agriculture sector is the largest contributing sector in most countries. The implementation of GST will affect many other sections of society.
GST is one of the largest contributors to the Indian economy. Moreover, making up more than 16% of their GDP. A state VAT applies to all agricultural goods. However, food items like sugar, rice, salt, flour, and wheat are exempt from VAT tax laws. Under the current rules, agricultural products go through a lot of licensing and some indirect taxes.
A GST is for anyone who cultivates on land either by their labor or by the help of family. A small number of farmers do not have to worry about this tax; anyone who runs a company in the agriculture sector has to pay this tax.
GST is a consumption-based tax, and any farmer or an agriculturist has to pay this tax whenever someone purchases the product. Therefore when an agriculturist buys a product on which GST is imposed, they are also liable. Besides, the farm management system is of great help to deal with GST.
Impact of GST
It is essential to have GST improve the reliability, transparency, and timeline of the supply chain mechanism. An enhanced supply chain will prove useful in reducing waste and cost to the farmers/retailers. GST will also reduce the cost of heavy machinery, which is essential in the agriculture sector.
Dairy farming, poultry farming, and stock breeding does not form part of agriculture's definition under the GST law. Fertilizers play an essential role in agriculture. It was previously taxed at 6 percent; however, after GST, the cost has increased by 12%. The same thing applied to tractors as well.
A tax of 18 percent is mandatory on pesticides for 12 percent. While tractors are under 28 percent, GST on pumps has decreased from 18 to 28 percent. Products that are highly used, such as wheat, milk, and rice, don't have any GST. The same goes for vegetables and fresh fruits. But a tax of 12 percent and 18 percent have been imposed on dry fruits.
Moreover, frozen products such as frozen vegetables and preserved fruits are under 5 percent GST. Processed food like fruits and vegetable juices are under a 12 percent tax from 5 percent, and jams, marmalades, and jellies have a higher tax at 18 percent.
Positive Impact of GST
The input tax credit provides a transparent and hassle-free supply chain, leading to a free commodity movement.
GST is obligatory when a product is sold and not when a product is in the production process.
Reduced transportation time will also help the agriculture market since under a single rate, the transportation will become hassle-free.
GST has included tax-related to cereals and oilseeds; this will benefit the consumers by eliminating the negative impact on these products' trade.
Negative Impact of GST
A hike in the prices of agricultural products.
A double tax burden.
The burden of taxes passes on to the farmers in the form of higher costs on storing foods. They are increasing the value of agricultural produce.
Imports of equipment now attract 18 percent GST, including the 5 percent duty tax. It will lead to an increase in prices.
The construction of warehouses which were earlier exempted from taxes now has GST imposed on it. The rising cost of storage and warehouses will be an added burden on the people related to the agriculture sector.
Initially, the GST creates many problems for individual districts, but gradually, the difficulties start subsiding. Some people will face revenue loss, but GST is beneficial for many farmers, cultivators, traders, and distributors in the long run. It is mainly for farmers to sell products at the best available price. However, a farm management system is of great help to reduce any potential loss in the business.
An increase in GST is inevitable because of inflation; however, the implementation of taxes will benefit many farmers and distributors in the long run. GST is said to have both negative and positive impacts. Tea, milk, and fertilizers will be negatively affected by it, which are very popular commodities.
When GST is a must on milk prices, it will not be welcomed by consumers since it is an essential commodity in everyone's day to day life. Agricultural products are subjected to diverse taxation rates as a single rate of goods will help the farmers and traders to be able to sell their products effectively wherever they wish within their country.