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Soonho.Kim
How can farmers and agribusiness prepare for the new tax regime?

Multiple actors have highlighted that the GST will facilitate and significantly increase the trade of goods and services within India. For instance, trade bodies in Bihar recently welcomed the ratification of the GST highlighting that it likely to increase country wide trade and State tax revenues.  Trade is expected to increase as the GST will eliminate the current multitude of taxes, duties and surcharges that exist between States thereby effectively creating a common Indian market. This will allow goods and services to move across State borders without the current checks or duties. For instance, successful GST implementation is expected to eliminate the queues of trucks waiting at state boundaries. Indian businesses are generally supportive of the GST as it is expected to simplify their value chains.

How can farmers and agribusiness prepare for the new tax regime?

Prakash Sinha
GST on agriculture sector

once GST comes into play, it is sure that it will disrupt the supply chain management in every sector. Agriculture being the primary sector of the economy will not remain untouched with the GST. Primirlarily, the activity of the farmers will not come within the net of GST as the revise model Law exempts the  agriculturist from taxes and even from the registration itself. However, the price of inputs which are used by the farmers may get effected and increase the cost of farming.

S.Allen
inputs

How do you suggest the farmers can then prepare for these changes in the cost of inputs, etc?

p.purushotham
Farmers have to prepare themselves for GST regime

Farmers will have to first understand the new tax system, its procedures, compliance requirements, and its impact on their business operations. They have to equip themselves with knowledge on business procedures involving  documentation and the digital transactions, use of information technology. Their fears about the complexities on digital transactions should be dispelled, their  attitudes should be changed for compliance. They should acquire skills and knowledge to comply with the the business procedures as demanded by the staff manning markets,  checkposts, banks, warehouses, coldstorage units etc.

Moving from one system to another usually invokes resistance, and can increase misunderstandings. It can cause differing interpretations in the short run, resulting in a spurt in litigation and disputes.  With propoer training and awareness building, this challenge can be tackled.

PK joshi
Impact on farmers

I do not think GST will make much impact on agricultural production. If inputs are rationally taxed, it may benefit farmers in reducing costs. But GST will affect agribusiness industry, their production and consumption.

S Allen
information sharing

Whose role will this be to provide training and increase understanding of any possible implications to agro-processing or input supply? 

PK Joshi
Information sharing

I think central government should launch a program on capacity building and awarenss program. Earlier it was done through NAFED for WTO, non-tariff barriers and other trade related issues.

S Allen
capacity building

Are there discussions on this type of initiative and funding mechanisms?  Would you recommend focusing first in particular  states or for particular types of producers?

PK Joshi
Capacity building

NAFED and NABARD supports for capacity building in such new initiatives of the government. We may recommend that these organizations develop the capacity building programs for different stakeholders and support for different states in India.

Prakash Sinha
GST on agriculture sector

The government is quite sensitive towards the agriculture sector. the government provide various subsidies to ensure that the cost of the agriculture does not go up. The cost of various inputs like fertilizers, seeds, pesticides, elecrticity may not be impacted by the new regime. However, our apprehention is towards the supply of farm Labour through contractor, which constitutes a major cost and it may impact the cost of agriculture adversely, unless the government provides specific relief.

PK Joshi
GST and farm labour

Labor is important component of total input cost. Two things are important: (i) the cost of labor is steeply declining and machine cost is rising; and (ii) it is very unusual that farm labor is hired through contractor. Informal markets exists in farm labor. Therefore, taxes on farm machinaries will make a difference.

VARI
How do you suggest the farmers can then prepare for these change

Due to demontetization of big currency notes we see that farmers are rendering to their old stratergy of barter system i.e giving part of their produce as payment of cash to the fertilizer & pesticide stores as well as people working on the farm.

p.purushotham
How farmers and agribusiness can prepare for the GST regime

Farmers, aggregators, commission agents, traders, and all other participants in the agricultural trade will have to first understand the new tax system, its procedures, compliance requirements, and its impact on their business operations. They have to equip themselves with knowledge on business procedures involving  documentation and the digital transactions, use of information technology. Their fears about the complexities on digital transactions should be dispelled, their  attitudes should be changed for compliance. They should acquire skills and knowledge to comply with the the business procedures as demanded by the staff manning markets,  checkposts, banks, warehouses, coldstorage units etc.

Moving from one system to another usually invokes resistance, and can increase misunderstandings. It can cause differing interpretations in the short run, resulting in a spurt in litigation and disputes.  With propoer training and awareness building, this challenge can be tackled.

 

The GST and NAM are complementary to each other. Both open up wider range of opportunitiates for farmers to participate in markets beyond their immediate localaity. In order to benefit from such potential, small farmers have to acquire managerial skills and  threshold level business scale - capacity. This is better accomplished if they pool their individual market surplus into larger lots by leveraging on their collective strength. For this, they need to form themselves into self help groups, producer organizations, producers companies and cooperatives.  Further, they should be made ready to utilize dispute resolving mechanism.

PK Joshi
Agribusiness and GST

NAM creates market for farmers. Farmer is seller in NAM. While in GST, farmer is buyer of inputs. Givernment may consider to bring GST for agri-inputs to first category of taxes to reduce cost of production. On front-end, unpacked food commodities are exempt from taxes. But processed commodities will come under the purview of GST. If we need to promote processing industry and increase consumption of processed commodities, the GST may be moderate or low.

I think, while NAM will explore opportunities to strengthen value chains, GST, will have not much implications on food commodities but will shape agro-processing industry. 

S Allen
Producer organizations

Are there discussions of how self-help groups or producer organizations/cooperatives are responding to the expected changes from the GST Bill?  Are there examples in particular states in which information sharing regarding impacts from these changes (GST and NAM) is coming from the POs?

Prakash Sinha
GST on agriculture sector

Further, the law has narrowed down the scope of the agriculturist and we understand that only those persons who are engaged in the actual cultivation or farming either through its own labour or contracted labour is being covered now.

In technical terms as per section 2(8) of revised model GST Law defines the agriculturist who cultivates the land personally for the purpose of agriculture and the section 2(106) has defined the term cultivates personally for the agriculture.

This section 2(106) covers the cultivation and farming through its own labour or hired labour.

devesh roy
will the mandi taxes going

will the mandi taxes going away have a compensation built in the transfer to states under the GST system

p.purushotham
Mandi taxes

Mandi taxes will be subsumed into the GST tax structure. All tax payments are systematically entered to give complete transparancy. Therefore, there will not be any glitches or hicups for any market participant. 

Amit.Pujara
will the mandi taxes going

Mandi tax may remain in the system

'Do you look at smooth sailing post GST?

The concern is other than VAT, will the other local taxes too get subsumed in GST or not. Because a major issue, we feel is the Mandi tax - Market fees, which is prevalent in many States. It ranges from 1.5-2 per cent to even 4 per cent in states like Punjab and Haryana. So, if this Mandi Tax is not going to get subsumed in GST, this will add to the burden. Mandi tax - a state subject - is one area, where the States can have their own views and end up taxing it and defeating the very purpose of the GST. The Government has to look at it seriously as it will add to the prices of the commodity. This is something, which the state council or the GST council needs to address. It certainly is a concern for the industry just like high taxation is a concern for the industry. We feel being an essential commodity, the taxation should be minimum on the essential commodities.

relevant extract from the interview of Mr. Atul Chaturvedi, Solvent Extractors Association of India President-elect in HBL.

http://www.thehindubusinessline.com/economy/agri-business/mandi-tax-will...

PK Joshi
Mandi taxes

Mandi taxes will be there. But e-NAM will take care of mandi taxes.

Bhupender
Mandi Tax shall form part of GST

If we see the FAQ relesed by the ministry of finance on GST and constitutional amendment bill. It is the juridiction of the GST council to further recommend the tax ,leveies,surcharge related to Indirect taxes for that it has to be seen whether the taxes is of indirect nature and currently being charged by the states or centre,it forms part of the transaction chain that continue from manufacturing to Consumpion and its inclusion should result in free flaw of trade and if we test the mandi tax on these parameters than it shall form part of GST.

Prakash Sinha
GST on agriculture sector

Farmers in India are mainly dependent upon the hired labour for the purpose of various activities of cultivation and harvesting. Further, there are many post harvesting activities that takes place on the farm itself before the grain is dispatched to the APMC or put for sale. In the situation of scarcity of the own labour many farmers manily in Punjab,, Haryana and UP are dependent upon the hired labour which comes from eastern India. Earlier in the old regime of service tax the supply of the labour for the farming activities were in the negative list and hence exempted from the service tax. However, we didn't get similar situation in the new regime which may led to increase in the cost of hired labour for the purpose of farming. We understand that above issue is in the radar of the GST council and they may address this issue well before implementation.

p.purushotham
agricultural commodities should be labelled as ‘necessity commod

All food grains and food commodities that go into the common man’s food basket will be exempted from tax and a few items will be taxed at five percent. With this the government hopes to check the incidence of food inflation and ensure food security.

Jaiprakash0511
at presen many states taxes

at presen many states taxes cereals and pulses and processed milk products @ 4-4.5%. But in the GST regime lowest slab is 5%. Whether the processed food commodities and Milk products will fall under  zero rated goods or under 5% slab? if it would fall under 5% tax slab, then price for these commodities are bound to rise in the economy.

Prakash Sinha
GST on agriculture sector

As per our understanding Mandi Tax is charged and collected by mandi corporative and is not collected by state..As of now the list of taxes going to be subsumed includes state surcharges and cesses so far as they relate to supply of goods and services. Thus in our opinion Mandi Tax is not going to be subsumed as we didnt get any specific clarification in this regard.

devesh roy
tax credit

how the tax xcredit system will work with mandi tax paid  and subsumed in the GST. is there clarity on that?

Rahul.Ganatra
tax credit

As discussed above mandi tax will co exists with GST, hence in our view there will not be tax credit available for mandi tax paid. This will be part of the total cost of purchase, which is prevailing as of now.

VARI
GST on agriculture sector

Most of the trasactions will take place in cash  as done now it will take some time to have impact of GST on Agriculture 

Rahul.Ganatra
GST on agriculture sector

GST would have eventually facilitated transactions through banking channel in order to have seamless input tax credit flow. Demonetisation, in our view has advanced this process. 

VARI
GST on agriculture sector

going through bank channel involves fees as you know farmer income is low this extra fees will try to move him to request for cash trasaction unless there is no bank fees then we may have a different outcome 

Prakash Sinha
Impact on import of agricultural produce

How the GST would impact the import of agricultural goods?

PK Joshi
GST and import

After custom and import duties, the commodity will have same GST as of domestic production. I do not think that there will be any impact of GST will have on imports of food commodities.

Jaiprakash0511
GST and import

The Basic Custom Duties (BCD) are kept out of the ambit of GST. but import of machinaries for agricultural purpose and agro-processing received 5% concession on custom duties at present. So, since BCD are kept outside the GST, the importer of machineries for agricultural purpose may not be able to avail the set off. and the import cost would remain same as earlier.

Rahul.Ganatra
Impact on import of agricultural produce

There is no significant impact envisaged in import of agricultural commodities since Basic Custom Duty is continued to be levied as per present practice and CVD and SAD will be subsumed in GST which would make flow of input tax credit seamless.

However, there are some macro factors which may also have implications on the import:-

  1. GST is a welcome step since it would result in inclusion of the entire eco system of agricultural business into the economy giving it a status of the ‘structured industry’ enabling smooth flow of investment for development of the agri infrastructure.
  2. Development and expansion of agri commodities process leading to vertical integration by value chain participants which enhances value addition in agri process sector
  3. With vibrant eNAM and participation through FPOs, the farmers are set to eventually get fair price for their produce resulting in reduced regulatory efforts through MSP, subsidies etc.

Effectively using the hedging (futures & Options) platform given by Commodity Derivatives Market since the price discovery is efficient and is not impacted due to multiplicity of the tax structure

Rahul.Ganatra
Storage of agri commodities in warehouses

In our view, inefficiency may creep in obtaining the input tax credit in storage of agricultural commodities in warehouses since, input credit rules are separately governed under immovable property rules.

Sachin.Sinha
Benefit of Input tax

After GST, if the fertilisers and other products cost increases, whether the farmers can get the benefit of tax paid by them as tax on purchse of such product?

Madhav
Input Tax

Presently, fertiliser industry enjoys the support of Union and State Governments by way of tax concession / exemptions on inputs as well as on finished fertiliser products. If these exemptions / concessions are withdrawn under GST and the rate of GST is kept, say, at a level of 18%, the incidence of tax on fertilisers will increase significantly. Another likely issue is that the current incidence of tax on inputs is higher than the incidence of tax on finished fertilisers due to subsidy element, which is currently exempted, and taxing the subsidy in any case is not desirable even in future. Thus, it will result in accumulation of large amount of unutilised input tax credit blocking industry’s funds with tax authorities on a regular basis.

Madhav
Agriculture scientific Research

Whether the scientific research in the agriculture shall form part of Agriculture or agriculture extension services under the GST pr not?

Akash Gupta
Scientific Research in agricultural sector

As per the revised model GST Law, agricultural scientfic research shall not form part of the agriculture and thus, GST would be chargeable on that. Previously, scientific research on agriculture was covered under negative list. So, we are expecting more clarification regarding this matter from the government.

devesh roy
with GST coming in with large

with GST coming in with large scle Direct Benefit Transfer Scheme if at all for fertilizers, should the subsidy issue in fertiizer not change? I think it will. it depends on how fast and how extensively they are rolled out

Jaiprakash0511
Agriculture scientific Research

All agricultural services would be exempted from the GST. So, the agricultural extension services

Prakash Sinha
Agriculture scientific Research

Agricultural Services and Agricultural extension services are covered in the negative list of the service tax. However, no such list is provided under the GST. So, as per our understanding on the basis of the information available, agricultural services and agricultural extension services would be chargeable to GST.

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