Farm machinery, tractors, fertilisers now attract 5% GST: Check full list

GST Council meet: GST on farm machinery, tractors, fertilisers and other agri items cut to 5 per cent from higher rates, giving relief to farmers

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The Goods and Services Tax (GST) Council on Wednesday approved a new two-slab tax structure. The 12 per cent and 28 per cent slabs have been removed. Taxes on several essential goods have been lowered, while some items will face higher levies.

 

Finance Minister Nirmala Sitharaman said the change is more than just rate cuts. She called it a “structural reform” that will make GST simpler for both businesses and consumers.

 

“All decisions were taken unanimously, with no disagreement from any state,” Sitharaman said after the meeting. The new rates will apply from September 22, the first day of Navratri.

 

Explaining the move, Sitharaman said the reform goes beyond lowering taxes. “It’s also on structural reforms and for ease of living. We have corrected the inverted duty structure problems. We have resolved classification-related issues, and we have ensured that there is stability and predictability about the GST,” she added.

 

The rate cut aims to give relief to common households. GST on everyday products like soap, toothpaste, namkeen, chocolates, and coffee has been reduced to 5 per cent from 12 per cent or 18 per cent.

 

Similarly, many handicraft and farm-related goods, including tractors and composting machines, will now attract 5 per cent GST instead of 12 per cent. Renewable energy products such as windmills and biogas plants will also come under the 5 per cent slab.   

 

Agriculture sector

 

GST cut from 12 per cent to 5 per cent

• Diesel engines up to 15HP

• Hand pumps

• Nozzles for drip irrigation and sprinklers

• Drip irrigation systems and sprayers

• Soil preparation machinery, rollers, and parts

• Harvesting and threshing machines, straw balers, hay mowers, and parts

• Poultry-keeping or bee-keeping machines, incubators, brooders, and parts

• Composting machines

• Tractors (except road tractors above 1800 cc)

• Self-loading/unloading trailers for farming

• Hand-pulled or animal-drawn carts

 

GST cut from 18 per cent to 5 per cent

• Tractor tyres, tubes, and rear wheels

• Agricultural diesel engines (above 250cc) for tractors

• Hydraulic pumps for tractors

• Key tractor parts: wheel rim, centre housing, transmission, front axle, bumpers, brakes, gearboxes, transaxles

• Radiators, silencers, clutches, steering wheels, fenders, hoods, grills, side panels, extension plates, fuel tanks 

Fertilisers

 

GST cut from 18 per cent to 5 per cent

• Sulphuric acid

• Nitric acid

• Ammonia

 

GST cut from 12 per cent to 5 per cent

• Gibberellic acid

• Bio-pesticides, including bacillus thuringiensis (var. israelensis, kurstaki, galleriae), bacillus sphaericus, trichoderma viride, trichoderma harzianum, pseudomonas fluorescens, beauveria bassiana, NPV of Helicoverpa armigera, NPV of Spodoptera litura, neem-based pesticides, and cymbopogon

• Micronutrients listed under the Fertiliser Control Order, 1985, produced by registered manufacturers

 

Why farm machinery not fully exempted

 

The GST Council stated that the aim of the rate changes is to strike a balance between farmers who use the machines and the companies that manufacture them. While giving relief to farmers is important, the government also wants to ensure that domestic manufacturers are not harmed.

 

If farm machinery is made completely tax-free, manufacturers and dealers would not be able to claim input tax credit (ITC) on the GST already paid on raw materials. They would also have to reverse the ITC they had availed earlier. This would raise their cost of production, and the higher cost would eventually be passed on to farmers through higher prices. That would defeat the purpose of providing relief.

 

Why small tractors not fully exempted

 

The goal is to support farmers without discouraging local producers. If small tractors are kept at zero tax, manufacturers cannot claim ITC on inputs. This would increase their costs and those costs would ultimately be transferred to farmers. Hence, a full exemption would end up being counterproductive.