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How will an increase in agricultural trade in India support improvements in food security?

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How will an increase in agricultural trade in India support improvements in food security?

The implementation of the GST is expected to significantly boost trade inside India. The GST will eliminate the current multitude of taxes, duties, and surcharges that exist between states, thereby effectively creating a common Indian market. However, the taxes that will be imposed on the movement of goods are not clear. For instance, if goods move from producing states to consuming states, it is unclear which state will receive the tax benefits and how those benefits will be structured.

The Central and State governments have joined hands to register for the new Goods and Services Tax Network (GSTN), a non-profit, non-government company that will provide shared information technology infrastructure. The key objectives of the GSTN are to provide a standard and uniform interface for all government agencies.

How will an increase in agricultural trade in India support improvements in food security?

food security

Freer movement of agricultural trade facilitate quick response to market signals. Food grains, and other food commodities move from surplus zones to deficit zones in a seamless manner. This is a good enough reason to more number of traders to participate and thus can  help in meeting localised food shortages. Apart frpm facilitating better tax compliance, the GST system also feeds on a regular basis more accurate data on the agricultural and food stock levels at the national and regional level. This makes it easy in implementing food security related decisions.

Prakash Sinha
improvement in food security

GST implementation would lead to seamless movement of agricultural products across different states, which will lead to better distribution of agricultural produce from states having surplus agricultural produce to other states. The essential perishable goods would be able to reach the desired destination within time and at relatively lower cost because of reduction in check posts, paper work and removal of multiple taxation of goods while transportation from one state to another.

S Allen
food security

Are there any caveats to this increase in food access?  What are the necessary conditions for this improvement in food security under the GST?

PK joshi
Food security

I do not think that GST will have any impact on food security as majority of food commidities are exempted from text net.

Naveen P Singh
Food security

The main issue in the application of GST to food is the impact it would have on those living at or below subsistence levels. For those at the bottom of the income scale, it doubtless accounts for an even higher proportion of total expenditures and incomes. Taxing food could thus have a major impact on the poor. By the same token, a complete exemption for food would significantly shrink the tax base. Food includes a variety of items, including grains and cereals, meat, fish, and poultry, milk and dairy products, fruits and vegetables, candy and confectionary, snacks, prepared meals for home consumption, restaurant meals, and Beverages. in India, while food is generally exempt from the CENVAT, many of the food items, including food grains and cereals, attract the state VAT at the rate of 4%. Exemption under the state VAT is restricted to unprocessed food, e.g., fresh fruits and vegetables, meat and eggs, and coarse grains. Beverages are generally taxable, with the exception of milk. The alternative of exempting food altogether (or zero rating) would not be any better as it would have an adverse impact on Revenue Neutral Rate.

In the rural sector, the predominant distribution channel for unprocessed food would be either a direct sale by the farmer to final consumers or through small distributors/retailers. Even where food is within the scope of the GST, such sales would largely remain exempt because of the small business registration threshold. Thus, prices of the agricultural items and services are expected to rise after the implementation of the GST, although the overall inflationary impact of the proposed indirect regime will be negative. further, the output of agricultural sector is mostly exempt from tax, and inputs in agricultural sector like power and fertilizer are heavily subsidized for this sector, and will continue to be subsidized. However, in order to harmonize the provisions of APMC Act, EC Act and WDR Act in the newly rechristened e National Agricultural Market (eNAM), the implementation of GST will facilitate the rolling out of eNAM in letter and spirits by subsuming all kinds of taxes/cess and will improve market efficiency and reduce overhead costs. The ease of availing tax credit under GST regime is expected to boost and ease the interstate movement of goods as the GST has been labelled as a ‘destination-based tax’ meaning that goods and services will be taxed in states where they are consumed, by contrast, goods are currently taxed in states where they are produced. In effect, this means that ‘producing’ States are likely to experience a decrease in total tax revenues, and ‘consuming’ States an increase in total tax revenues, due to changes to where goods are taxed. However, it is hoped that the taxation of services by States (currently only the central government taxes services but the GST will allow States to tax services) will allow these States to mitigate the expected shortfall in tax revenues.


If the exemption under the state VAT is restricted to unprocessed food, e.g., fresh fruits and vegetables, meat and eggs, and coarse grains, is it expected this would shift consumption patterns?

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