REDUCTION IN GOODS AND SERVICES TAX (GST) RATES TO BOOST COOPERATIVES, FARMERS AND RURAL ENTERPRISES

REDUCTION IN GOODS AND SERVICES TAX (GST) RATES TO BOOST COOPERATIVES, FARMERS AND RURAL ENTERPRISES

7-SEP-ENG 1

RAJIV NAYAN AGRAWAL

DELHI-------------------------In a historic decision, the Central Government has announced a comprehensive reduction in the Goods and Services Tax (GST), which will directly benefit more than 10 crore dairy farmers including cooperatives, farmers and rural enterprises. These reforms will strengthen the cooperative sector, make their products more competitive, increase demand for their products and their income. It will promote rural entrepreneurship, encourage cooperatives in the food processing sector and make essential commodities available at an affordable cost to millions of families. The GST rate cut will benefit cooperatives engaged in agriculture and animal husbandry, promote sustainable farming practices and provide direct benefits to small farmers and Farmer Producer Organizations (FPOs). The #NextGenGST reforms led by Prime Minister Narendra Modi have been welcomed by the entire dairy cooperative sector, including the largest cooperative brands like Amul.

In the dairy sector, farmers and consumers have been given direct relief in GST. Milk and cheese, whether branded or unbranded, have been exempted from GST. GST on butter, ghee and other such products has been reduced from 12% to 5%. GST on milk canisters made of iron, steel and aluminium has also been reduced from 12% to 5%.

These measures will make dairy products more competitive, provide direct relief to dairy farmers and strengthen women-led rural entrepreneurship and Self Help Groups (SHGs), especially those engaged in milk processing. Affordable dairy products will provide essential protein and fat sources to every household and increase the income of dairy cooperatives.

Major relief has been given in food processing and household items. GST on cheese, namkeen, butter and pasta has been reduced from 12% or 18% to 5%. Jams, jellies, yeast, bhujia and fruit pulp/juice based beverages will now come under 5% GST. GST on chocolates, corn flakes, ice cream, pastries, cakes, biscuits and coffee has also been reduced from 18% to 5%.

Lower GST will reduce household expenditure on food items, increase demand in semi-urban and rural areas and promote the growth of food processing and dairy cooperatives. This will strengthen food processing and dairy cooperatives and private dairies and increase the income of farmers. Along with this, GST on packing paper, boxes and crates has been reduced to 5%, which will reduce logistics and packaging costs for cooperatives and food producers.

In the agricultural machinery sector, GST on tractors with capacity less than 1800 CC has been reduced to 5%. This will make tractors more affordable and will benefit not only crop producing farmers but also animal husbandry and mixed farmers as they can be used for fodder cultivation, fodder transportation and agricultural produce management. GST on tractor tyres, tubes, hydraulic pumps and many other parts has been reduced from 18% to 5%, which will further reduce costs and directly benefit cooperatives.

In the fertilizer sector, GST on key raw materials like ammonia, sulphuric acid and nitric acid has been reduced from 18% to 5%. This will improve the inverse tax structure, reduce the input cost of fertilizer companies, prevent price rise for farmers and make fertilizers available at the time of sowing. This will directly benefit cooperatives.

Similarly, GST on twelve biopesticides and several micronutrients has been reduced from 12% to 5%. This will make bio-based agricultural inputs more affordable, encourage farmers to move away from chemical pesticides to biopesticides, improve soil health and crop quality, and directly benefit small organic farmers and Farmer Produce Organisations. The move is in line with the government’s mission of natural farming and will also benefit cooperatives.

In commercial vehicles, GST on goods vehicles such as trucks and delivery vans has been reduced from 28% to 18%. Trucks are the backbone of India’s supply chain and carry about 65–70% of freight traffic. This will reduce the capital cost of trucks, reduce freight per tonne-kilometre and have an impact on the transportation of agricultural produce. This will be seen in making the fuel cheaper, reducing logistics costs and increasing export competitiveness. Also, GST on third-party insurance of freight vehicles has been reduced from 12% to 5% and the facility of input tax credit (ITC) has also been provided, which will further strengthen these efforts.