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Do Farmers Need To File GST Returns In India
Abhinandan Banerjee • December 22, 2024
The implementation of the Goods and Services Tax (GST) in 2017 marked a significant reform in India's indirect tax structure. While aiming for a more streamlined system, the impact on the agricultural sector, a crucial component of the Indian economy, raised concerns and questions. This blog delves into the essential aspects of GST return filing for the agricultural sector, addressing common misconceptions and providing valuable insights for farmers and related entities.
Understanding GST Applicability in Agriculture:
It's crucial to understand that agricultural income, as defined under the Income Tax Act, 1961, is exempt from GST. This exemption applies to the sale of various agricultural produce directly by an agriculturist, including:
- Crops: Fruits, vegetables, grains, pulses, oilseeds, etc.
- Livestock Products: Milk, eggs, meat, fish, poultry, etc.
- Other Produce: Honey, flowers, medicinal plants, etc.
Who is an "Agriculturist" under GST?
The GST Act defines an "agriculturist" as:
- An individual or Hindu Undivided Family (HUF) involved in the cultivation of land:
- By own labour
- By the labour of family
- By hired labour under personal supervision or the supervision of a family member
- By servants on wages payable in cash or kind
Exempt Supplies and Registration Threshold:
While the sale of agricultural produce by an agriculturist is exempt from GST, it's important to note that:
- Sale by Commission Agents: If a commission agent, acting on behalf of the farmer, sells the agricultural produce, the commission earned is taxable under GST.
- Inter-state Sale: In the case of inter-state sale of notified agricultural produce (specified by the government) through a commission agent or a trader, a concessional Integrated GST (IGST) rate of 2.5% applies.
- Registration Threshold: Even agricultural producers exceeding the annual turnover threshold of Rs. 40 lakhs (Rs. 20 lakhs in some special category states) are not mandated to register under GST. However, voluntary registration is an option, allowing them to claim Input Tax Credit (ITC) on various purchased inputs used for agricultural activities, potentially leading to tax benefits.
Scenario | GST Applicability | Reason |
Farmer selling vegetables directly to consumers | Exempt | Sale by "agriculturist" of own produce |
Commission agent selling vegetables on behalf of a farmer | Taxable | Commission earned is considered a service |
Inter-state sale of notified agricultural produce through a commission agent | Taxable | 2.5% IGST applies |
Farmer exceeding the registration threshold but not registered | Exempt | No mandatory registration |
Farmer exceeding the registration threshold and opting for voluntary registration | Taxable | Option to claim ITC on eligible purchases |
Impact on Farmer Producer Organizations (FPOs):
- FPOs registered under Companies Act, 1956 or Cooperatives Act: If an FPO acts as a trader or commission agent for its members, it has to register under GST and charge GST on its taxable supplies.
- FPOs registered under FPO Act, 2022: These FPOs enjoy a concessional GST registration threshold of Rs. 1.5 crore and can claim ITC on various agricultural inputs purchased for their members. (Source: https://enam.gov.in/web/stakeholders-Involved/fpos)
GST Return Filing Requirements:
- Registered FPOs: FPOs registered under GST need to file regular GST returns as prescribed by the GST regime, depending on their turnover and nature of transactions.
- Registered Commission Agents and Traders: Commission agents and traders involved in the sale of agricultural produce are subject to GST registration and filing of returns.
Conclusion:
While the agricultural sector itself is largely exempt from GST, understanding the nuances of the law and its applicability to various stakeholders is crucial. Farmers and related entities like FPOs should seek professional guidance to ensure proper compliance with GST regulations and avail themselves of potential benefits like ITC claims for registered entities.
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Abhinandan Banerjee
(Associate Manager - Marketing)
Abhinandan is a dynamic Product and Content Marketer, boasting over seven years of experience in crafting impactful marketing strategies across diverse environments. Known for his strategic insights, he propels digital growth and boosts brand visibility by transforming complex ideas into compelling content that inspires action.
