Farmers stand to pay less for seed storage, tractor maintenance, and coffee processing after the Goods and Services Tax (GST) Council moved to extend and clarify concessional tax rates across key agricultural activities and inputs.
The decisions, taken at the council’s 57th meeting on 8 October, address gaps in the existing framework that denied tax relief to certain farm-related inputs and post-harvest services due to rigid processing, storage or supply rules.
Mint breaks down key decisions and what they mean for farmers.
What has the GST Council decided?
The council’s decisions cover four areas of agricultural activity. It exempted storage and warehousing services for seeds meant for sowing, created a separate exemption for coffee-curing services provided to cultivators, and applied a nil rate to psyllium seeds (isabgol), whether fresh, chilled, frozen or dried. It also brought retreaded tractor tyres under the 5% GST rate, matching the treatment of new tractor tyres. Together, the measures cover different stages of the agricultural supply chain, from storing seeds before sowing to maintaining farm machinery and handling produce after harvest.
Why has seed storage been exempted?
While the existing exemption covered storage and warehousing services for agricultural produce, seeds meant for sowing often undergo grading, chemical treatment, and packing before reaching farmers. This processing created ambiguity over whether their storage qualified for relief. The council resolved this uncertainty by introducing a specific exemption for storing and warehousing sowing seeds, shifting the regulatory focus to the seed’s end use rather than its processing status. While this change could lower expenses across the seed supply chain, the relief is strictly limited to seeds meant for sowing and does not extend to seeds intended for consumption or industrial use.
How will coffee growers benefit?
Coffee curing has faced uncertainty under the general exemption for services relating to cultivation because the activity is often carried out at a separate facility rather than on the farm. The council has created a standalone exemption for curing services supplied to cultivators, clarifying the treatment of this post-harvest activity. Curing involves preparing harvested coffee for marketing through processes such as drying, hulling, cleaning, sorting and grading.
Coffee growers who depend on specialised facilities could benefit if the exemption reduces the charges they pay for these services. The exemption is specific to curing services and does not extend to every activity associated with coffee processing.
What does the nil rate on psyllium seeds mean?
The council has created a separate entry for psyllium seeds at the nil rate, irrespective of whether they are supplied fresh, chilled, frozen or dried. The decision is meant to prevent varying tax treatment depending on the form in which the seeds are supplied. A uniform treatment could provide greater certainty to farmers and traders and reduce disputes over classification. For cultivators, the benefit will depend on how the revised treatment affects trading costs and the prices they receive. The council has not quantified the expected financial gains.
Will the decisions reduce farmers’ costs significantly?
Although these decisions resolve targeted ambiguities in the tax treatment of farm inputs and services, their total impact on overall cultivation expenses remains uncertain. The reduced tax rate on retreaded tractor tyres could particularly benefit marginal farmers, who hold about 68.5% of India’s operational landholdings, according to the Agriculture Census 2015-16. With limited land and financial resources, these farmers must monitor cultivation costs closely. Cutting the GST on retreaded tractor tyres to 5% could lower maintenance expenses for those who choose retreading over buying new tyres.
Binod Anand, a member of the high-power committee on minimum support price (MSP) & agricultural reforms, said, “The measures address some of the cost pressures faced by farmers, particularly in machinery maintenance and post-harvest handling. Bringing retreaded tractor tyres under the 5% GST rate could make repairs more affordable, especially for marginal farmers who have limited resources to absorb rising cultivation costs. Similarly, exempting seed storage and coffee-curing services could reduce costs across the agricultural supply chain.”