GST on Agriculture and Farming — Exemptions, Taxable Items and Compliance

Agriculture is the backbone of India's rural economy, and the GST framework has been designed to largely exempt agricultural produce and services from tax. However, the boundary between what is exempt and what is taxable can be complex — particularly for agri-processing businesses and farm input suppliers. Here is the complete guide to GST on agriculture in India.

Exempt Agricultural Produce Under GST

The following are exempt from GST (Schedule I of CGST Act):

• Fresh/dried fruits and vegetables (unprocessed)
• Rice and other cereals (other than branded and pre-packaged)
• Fresh milk, eggs, and non-processed meat/fish
• Seeds for sowing
• Live plants and trees
• Raw jute, cotton (ginned/baled)

Key distinction: Once agricultural produce is processed (refined, branded, packaged), it may become taxable. E.g., fresh coconut is exempt; coconut oil is taxable at 5%.

Exempt Agricultural Services

• Agricultural operations: tilling, plowing, sowing, harvesting, threshing — exempt
• Supply of farm labour — exempt
• Leasing/renting of vacant land for agricultural purposes — exempt
• Warehousing of agricultural produce — exempt
• Fumigation of warehouses storing agricultural produce — exempt
• Transportation of agricultural produce — exempt
• Loading/unloading/packing of agricultural produce — exempt

Taxable Items in the Agricultural Sector

• Branded packaged food: If branded and pre-packaged, cereals, pulses, flours attract 5% GST
• Chemical fertilizers: 5% GST
• Pesticides and insecticides: 18% GST
• Tractors (above 1800cc engine): 12% GST; small tractors: 12% GST (concessional)
• Agricultural implements (manually operated): Nil GST
• Power tillers: 12% GST
• Dairy machinery, food processing equipment: 12-18% GST

GST for Farmer Producer Companies (FPC/FPO)

Farmer Producer Companies (FPCs) that aggregate and market agricultural produce enjoy the same GST exemptions as individual farmers for raw produce. However, if the FPC processes produce or provides taxable services, it must register for GST (once turnover exceeds ₹20 lakh) and comply with GST filing requirements.

Conclusion

GST largely exempts primary agricultural activities — but the moment value is added (processing, branding, packaging), tax may kick in. SPOTON provides GST advisory and compliance for agri-businesses, FPOs and food processing companies across Kerala. Contact us for expert agricultural sector GST services.