Skip to main content

GST makes inroads into agriculture sector


Asubtle change in the definition of an “agriculturist” in the draft Central GST Bill, currently under consideration of Parliament, has brought absentee landlords under the ambit of the goods and services tax (GST).
Also, a farmer who is involved in sericulture — the rearing of silkworms — may be required to register for GST under the new indirect tax regime, following the tweak in the definition. The jury, though, is still out on whether bringing sericulture farming under the ambit of GST will increase the price tag of your favourite silk sari.
The definition of an "agriculturist" according to section 2(8) of the draft Central GST (CGST) Bill has been amended to cover an individual or any Hindu Undivided Family cultivating land either through own labour or hired labour under individual or family supervision. The draft model GST Bill introduced last November referred to sn “agriculturist” as “any person” cultivating land.
“The government intends to cover only the barebones or actual farmers under the definition of agriculturist,” said L Badri Narayanan, partner, Lakshmikumaran & Sridharan.
Tax experts say absentee landlords do not fall under the definition of agriculturists as they do not undertake cultivation on their own accord. They give their land for cultivation to other agriculturists who, in turn, pay rent by means of cash or a share in the crop. “Absentee landlords would therefore be liable to pay GST on rent received in cash or in kind as a share of crop,” said Dinesh Agrawal, executive director, Khaitan & Co.
Agreed Satya Poddar, partner, EY India: “Rental from land leased for agriculture could be taxable under GST in whatever form it is received, provided it is not exempted under subsequent rules.”
Schedule II of the draft CGST Bill lists lease, tenancy, easement and licence to occupy land as supply of service. Experts say in case of absentee landlords, providing land for cultivation would be construed as supply of service under the GST regime. However this would be subject to the absentee landlord crossing the ~20 lakh annual turnover threshold for GST registration, pointed out Narayanan of Lakshmikumaran & Sridharan. For northeastern states, the threshold for GST registration is ~10 lakh.Tax experts, like Poddar, feel keeping agriculture produce under the tax-exempt list does not bode for the farming community. The typical inputs for farmers, such as fertilisers, seeds, tractors are taxable under GST. However, as farming produce is largely exempt from GST, the farmer is not in a position to claim any input tax credit. “This could breed inefficiency,” Poddar said. Most experts expect the government to exempt rental income from agriculture from GST in subsequent rules, given the widespread impact of this measure.
Agriculture experts point out the land lease model is a widely prevalent practice, accounting for more than half the land under cultivation.
According to a study on agricultural land leasing by T Haque, head of NITI Aayog's land policy cell, about 57 per cent of leased area in the kharif season (sown in July and harvested from October) and 54 per cent in the rabi season (sown and harvested in October-March period) where operating under short-term leases.
The narrowing down of the definition of an agriculturist in the draft CGST Bill means activities such as sericulture and grazing may not be treated as cultivation of land. “Thus a farmer who indulges in sericulture is required to take GST registration,” said Narayanan. This could have an impact on the price tag of silk products, depending on the rate charged, experts said.
Business Standard New Delhi,01th April 2017

Comments

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...

Govt invites applications for RBI deputy governor's post, last date Nov 30

  The government has invited applications for the post of deputy governor of Reserve Bank of India from interested candidates with at least 25 years of experience and below 60 years of age as on January 15, 2025.One of the deputy governors, Michael Patra’s current term will end on January 15.According to an advertisement, candidates should have at least 25 years of work experience in Public Administration, including experience at the level of secretary or equivalent in the Government of India, or persons who have at least 25 years of work experience in an Indian or International Public Financial Institutions; or persons of exceptional merit and track record at the national or international level in the relevant field.The last date of submission of the application is November 30, 2024.   It has been clarified that the Financial Sector Regulatory Appointments Search Committee (FSRASC) – a body which will select the candidates- is free to identify and recommend any other person a...