The most vital and vulnerable component of the economy is the agriculture sector with 16% GDP of the country. The sector which holds great importance to the economy and what GST Model holds for this part of the sector has many ears to this topic. Agriculture in all fields always had the soft corner because of which exemptions from taxes as relief has always been provided to this industry and indirect tax is no exception with GST following the same.
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- The agriculture sector would be exempted from undertaking GST compliances as well.
- All basic agriculture goods (not processed) which are not chargeable under current VAT Laws would not be charged to tax in GST.
- Service tax also exempts several services in relation to agricultural produce. But the definition of agricultural produce has always attracted disputes. Thus, the new definitions as per GST section 2(7) which defines agriculture and 2(8) which defines agriculturist holds importance with avoidance of further notification to not complicate the definition. As agriculturist would come under non-taxable person it holds importance to them as they would not be required to comply with GST compliances after falling into the above definition.
- Shortages in agricultural goods which are imported as domestic produce could not fulfill the requirement are charged with custom duty. As custom duty would not be subsumed in GST custom duty would continue. Hence, the exemption from basic duty on basic agricultural produce like pulses would continue.
- The main impact that GST in agriculture would bring is the inflation with currently 4% VAT being increased to 8% on many food items including cereals and grains as the exemption under VAT is limited to unprocessed food. The most affected from the inflation would be the consumers living below the poverty line.
Looking at the future picture implementation of GST would benefit the farmers in the long run with a single market which would help them to sell their produce at the best available prices. Thus, overall it will benefit the economy in the long run.