Select farm goods to be taxed under revamped GST

NEW DELHI: India has incorporated a new definition of ‘agriculturalist’ in the goods and services tax law to enable select farm items to be brought under the tax net nationwide. While farmers won’t have to register to pay the tax, registered buyers may need to collect the levy on a ‘reverse charge’ basis, similar to the purchase tax principle adopted in Punjab and Haryana.

Most farm produce will likely be exempted from the new tax and some cash crops are expected to attract the threshold rate. As per the latest definition, an agriculturalist is a person or a Hindu undivided family undertaking cultivation of land by own labour or labour of the family or by servants paid wages in cash or kind or by hired labour under personal supervision or supervision by any family member.

The draft central and integrated GST laws, which were approved by the GST Council, have incorporated the new definition. The Bills are expected to be introduced in the budget session of Parliament. The budget session resumed on Thursday after a recess.

“It was felt that the earlier definition was vague and open to interpretation,” a senior government official privy to the development told ET.

GST

The earlier draft contained a generic definition — agriculturalists are those who cultivate land personally for the purpose of agriculture. Agriculture itself was defined separately in the earlier draft. It said that agriculture, with all its grammatical variations and cognate expressions, includes floriculture, horticulture, sericulture, the raising of crops, grass or garden produce and also grazing, but does not include dairy farming, poultry farming, stock breeding, the mere cutting of wood or grass, gathering of fruit, raising of man-made forest or rearing of seedlings or plants.

“Expansion of the definition of agriculturalist would ensure that the entire activity of agriculture would get consistent GST treatment, irrespective of the manner in which cultivation is done,” said Pratik Jain, indirect tax leader at PwC.

Jain said anyone other than an agriculturalist and dealing with agri-commodities, such as a trader, could still be subject to GST if the government so chooses. Purchasers of these commodities could be subject to GST under a ‘reverse charge’ enabling provision in the draft GST laws.

As of now, the understanding is that raw agricommodities such as wheat and grains may be exempt from GST while processed commodities such as packed rice would attract the tax, although at a lower rate. GST, which replaces multiple central taxes including excise duty, service tax, countervailing duty and state taxes such as value-added tax, entry tax, octroi and purchase tax with a single levy, is proposed to be implemented from July 1.