Quote on 56th GST Council meeting by Soumyak Biswas, Partner, Food & Agribusiness, Management Consulting, BDO India
Below the Quote on 56th GST Council meeting by Soumyak Biswas, Partner, Food & Agribusiness, Management Consulting, BDO India
"The recent announcement of the GST reform package will have a significant impact on the Indian economy including the agriculture and allied sectors. Reducing the GST rates on farm machinery and fertilizer inputs—from the current 12% (machinery) and 18% (fertilizer inputs like ammonia, sulphuric and nitric acid) to just 5% and even reducing the GST rates on many food items from 5% to nil or from higher slabs to 5% is expected to give a boost to rural demand, ease off cost pressures on producers which in turn will have a cascading impact on the economy especially in rural India.
Reduced Cost of Mechanisation: A lower 5% GST on tractors, engines, irrigation nozzles, and similar equipment would significantly reduce the upfront cost and make mechanization more accessible for small and marginal farmers. To reap the full benefits and make it inclusive for the farming community especially small and marginal farmers, supply chain inefficiencies (e.g., storage, transport) need to be addressed.
Cheaper Fertilizer and Input Supplies: Bringing down GST on fertilizer raw materials to 5% could lower production costs and potentially translate to lower prices for farmers. However, lowering GST on agrochemicals (from 18% to 5%) could adversely affect domestic manufacturers by opening the door to cheaper imports and creating an inverted duty structure.
Revitalised Rural Demand: These cuts could potentially reinvigorate rural consumption mostly through reduced input prices and improved accessibility, thereby providing a much-needed boost in farm economy activity
Overall, there seems to be a positive economic & structural Impact, which will see the green shoots, once these are effective and implemented. Relief from GST rate cuts on essential goods and inputs strengthens input affordability, encourages mechanization, and supports productivity gains—particularly important because agricultural output remains GST-exempt, offering no input tax credit flow-through to farmers.
Last but not the least, if the Government drives a policy coherence/ convergence with several subsidy schemes, it will significantly reduce the subsidy burdens for the Government which can be used for structural reforms and investment in upgradation and development of agri infrastructure, modernisation, adoption of technology which will unleash the full potential of the sector and put it on a faster growth trajectory."
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