New GST revisions anticipated to bring about a major boost to the Indian agricultural sector

• Recent GST revisions are expected to significantly benefit India's agricultural sector, especially for small and medium-scale farmers.
• A major reduction in the tax on agricultural machinery is projected to lower cultivation costs and enhance farmer profitability.
• Lower taxes on bio-pesticides and fertilizer raw materials are likely to encourage a shift toward organic and natural farming practices.
• The exemption of GST on milk and cheese, alongside reduced rates on other dairy products, aims to support milk producers and stimulate rural dairy entrepreneurship.
• Policy benefits extend to allied sectors, with lower taxes on fish farming, natural honey, and processed foods to promote diversification and value addition.
• Reduced levies on drip irrigation, solar equipment, and cold storage components are anticipated to boost the adoption of efficient technologies and strengthen rural infrastructure.
• The reforms are also designed to stimulate broader rural economic activity by making housing construction materials more affordable and supporting women’s self-help groups and handicraft producers.

The recent revisions to the Goods and Services Tax (GST) structure are anticipated to have a substantial and positive effect on India’s agricultural sector, particularly for small and medium-scale farmers. A significant reduction in the GST applied to agricultural machinery, such as tractors, harvesters, and rotavators (from 18% to 5%) is expected to meaningfully lower the cost of cultivation. This decrease in equipment costs is projected to enhance profitability for farmers by reducing their initial investment and operational expenses.

In a related move, the GST on essential agricultural inputs, including bio-pesticides, micronutrients, and certain raw materials for fertilizers like ammonia and sulfuric acid, has also been reduced. This is likely to encourage a shift toward organic and natural farming practices by making environmentally sustainable inputs more affordable. Additionally, the exemption of GST on milk and cheese, along with reduced rates on other dairy products such as butter and ghee, is designed to benefit milk producers, cattle rearers, and rural dairy entrepreneurs by stimulating demand and simplifying trade.

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The policy changes extend beyond crop cultivation to allied rural activities. Lower GST rates on products derived from fish farming, natural honey, and certain processed foods are intended to support diversification and value addition within the farm sector. Furthermore, a reduced tax burden on drip irrigation systems, solar energy equipment, and specific cold storage components is expected to encourage the adoption of resource-efficient technologies and strengthen the infrastructure supporting agricultural marketing and storage.

These fiscal adjustments are positioned not only to reduce production costs and raise farm incomes but also to stimulate broader economic activity in rural regions. By making housing construction under schemes such as the Pradhan Mantri Awas Yojana more affordable through reduced taxes on cement and iron, and by supporting women’s self-help groups and handicraft producers through exemptions, the reforms aim to enhance rural livelihoods and accelerate the transition toward an integrated and resilient agrarian economy.