* GST rationalisation lowers cultivation costs and promotes sustainable farming practices across India.
* Cuts on dairy, honey, fish and processing improve rural incomes and competitiveness.
* Reduced logistics taxes and better infrastructure enhance distribution and export potential significantly.
The introduction of GST in July 2017 was hailed as the most ambitious tax reform since Independence. For agriculture it came with the promise of a simpler system, lower cascading costs and fairer outcomes for farmers. Yet the sector still faced a patchwork of anomalies, with some inputs heavily taxed while others were exempt, leading to higher cultivation costs and uneven incentives.
Eight years later the GST Council has made a long-overdue rationalisation. This reform package is a clear departure from the distortions of the past. By easing taxation on machinery, fertilisers, bio-inputs, dairy products, honey, fish and food processing it reduces the burden on farmers, builds cooperatives and puts Indian agriculture on a more sustainable and competitive path.
Reducing the Cost of Cultivation
Indian farmers suffered for years from a contradictory system; seeds were exempt from tax but pesticides attracted 18%, fertilisers were charged 5% but tractors incurred 12% or more and irrigation and harvesting equipment bore 12%. All such disparities added up to 15–20% inflation in cultivation costs.
The new regime remedies this asymmetry. Tractors with engines below 1,800 cc now pay only 5% GST, down from 12% and tyres, tubes and hydraulic pumps have been reduced from 18% to 5%. In the same vein, sprinklers, drip irrigation sets, threshers and composting machines now pay only 5%. This populist approach brings mechanisation within the reach of even marginal farmers, allowing them to adopt modern technology, combat labour drudgery and improve productivity.
Balancing with Sustainability
The cost of fertilisers remains paramount to ensuring farm viability and food security. By cutting GST on critical intermediates like ammonia, sulphuric acid and nitric acid from 18% to 5%, the reform does away with the inverted duty structure that has since long questioned the strength of the industry. This stabilises the supplies of input, avoids unjustified cost-pass-through to farmers and provides for certain prices.
Just as important is the cut in GST on bio-pesticides and micronutrients (12% to 5%). This encourages a slow drift towards natural and climate-resilient agriculture, checks the excessive use of chemicals, and facilitates the government's agenda for sustainability. For small organic farmers and farmer producer organisations (FPOs), it makes bio-inputs accessible and profitable.
Engines of Rural Prosperity
Dairy is not just an industry but the pillar of rural livelihoods, especially for women and self-help groups. The cut in GST from 12% to 5% on butter and ghee and a reduction on milk cans to 5% acts directly to make the sector more competitive. The dual benefits are increased farmgate returns and cheaper nutrition for households.
Apiculture and aquaculture also gain. Reduced GST on natural honey supports rural beekeepers’ and tribal groups’ incomes directly while fish items moving from 12% to 5% provide aquaculture units with a new advantage. Even tendu leaves, critical for forest communities in Odisha, Madhya Pradesh and Chhattisgarh, are taxed at only 5% now, ensuring livelihood security for marginalised communities.
Lower Taxes, Higher Growth
Food processing has long been a weak point in India’s agriculture value chain. Only 10–12% of fruits and vegetables are processed locally against 40% in some parts of Southeast Asia. Investments were discouraged by high GST rates and the growth of the industry was arrested.
With the reduction of GST on ready-to-consume and preserved fruits, vegetables and nuts from 12% to 5%, entry barriers are substantially reduced. This change will stimulate investments in cold storage, reduce post-harvest losses, increase farmers’ share of consumer prices and provide a level playing field for FPOs and small-scale processors. In the long run it could unlock India’s value-added export potential and position the country as a formidable force in international agri-food markets.
Cutting the Hidden Cost of Food
High logistics costs equivalent to 13–14% of GDP have long been an invisible tax on agriculture. Trucks account for nearly 70% of freight traffic and elevated GST rates inflated transport expenses.
By reducing GST on commercial vehicles from 28% to 18% and availing input tax credit on goods carriage insurance, the reforms lower freight expenses significantly. This translates into cheaper, faster and more reliable transportation of perishable goods. The synergistic effect of these actions with investments in cold chains and digital logistics platforms could be revolutionary for domestic distribution as well as exports.
A Transformational Signal
GST 2.0 must be viewed as greater than a tax cut round. It is a policy message that puts farmers, cooperatives and small businesses at the forefront of growth. By reducing the cost of cultivation, encouraging sustainable inputs, building allied sectors and powering value chains, it reinterprets GST as a vehicle of rural growth instead of an instrument of distress.
Clearly, the success of the reform will rely on enabling complements, such as easy access to credit, greater digital literacy and high-quality infrastructure. But the vision is unmistakable: GST 2.0 strengthens Indian agriculture in line with the overall national vision of Viksit Bharat 2047.
