Reforms in Indian Agriculture and GST Rationalization
Indian agriculture has faced challenges due to a lack of value addition and organized processing of raw produce, affecting the integration from farm to fork. The multiplicity of taxes, state-level duties, cesses, and surcharges has been a major impediment. These issues have been addressed with the unified Goods and Services Tax (GST) system introduced in July 2017.
GST Rate Rationalization
- Recent rationalization of GST rates has further streamlined taxation of agricultural and processed food items.
- Most agricultural and processed food items now attract either zero or 5% GST.
- Items like ice cream, chocolates, biscuits, cookies, cakes, pastries, sugar confectioneries, and corn flakes, previously taxed at 18%, are now at 5%.
- Ice cream, a dairy product with 21% milk solids, is treated more fairly in the GST system.
- Uniform 5% GST is applied across all processed dairy products, with milk exempt.
Simplification of GST on Food Items
- The distinction between similar items, like skimmed milk powder and butter fat, has been removed for uniformity in taxation.
- Previously complex distinctions for items like salted, savoury-flavoured, and caramelized popcorn are now uniformly taxed at 5%.
- Indian breads such as chapati, roti, khakhra, and parathas, as well as pizza bread, now have nil GST rates, reducing classification disputes.
Impact on Agricultural Equipment
- A uniform 5% GST has been applied to agricultural equipment including tractors, harvesters, threshers, and drip irrigation systems.
Need for Agricultural Reforms
Beyond GST simplification, there is an urgent need for agricultural reform, specifically dismantling barriers to the marketing, movement, and stocking of farm produce. The government’s previous attempt at reform through three farm laws was repealed due to political pressures. For meaningful progress, these reform agendas need to be re-energized, as agriculture's significance cannot be overstated.
