Farmers to be taxed under GST

H’ble Finance Minister has tabled the CGST Law in Lok Sabha which is due for discussion today. As per section 9(4) of the Central GST Act it has been proposed that the purchaser of agricultural produce shall be liable to pay tax in lines of purchase tax levied in present tax regime. In such a scenario where a registered company buys agricultural produce from a farmer, GST has to be paid. Although the rate for GST for produce cultivated out of land has been proposed at zero, the segments like poultry farming, dairy farming, animal rearing are likely to be taxed at higher rate. In such a scenario there shall be compliance involved in case of agriculture. In the law tabled in the parliament the definition of agriculture has been deleted and it has been prescribed that agriculture would mean the produce cultivated out of land.

It has also been proposed that apart from agriculture if a registered person buys any goods or services from unregistered persons, the receiver shall be liable to deposit the tax as if it was his own liability. This will virtually bring all the goods and services under GST because due to disadvantages of unregistered person every person would prefer to be registered under GST. For example. M/s ABC Limited buys goods worth Rs. 1 lacs from Mr. Ram who is unregistered. The GST rate on the said commodity be 18%. In such a scenario GST to the amount of Rs. 18,000/- has to be paid by M/s ABC Limited because of section 9(4). Had section 9(4) would not have been introduced no tax was to be paid on the said transaction.

In such a scenario, GST is going to have far reaching impact on common man as well as the business units. 

Keshav R Garg

(B.Com, CA, CS, ISA(ICAI))

Author: Bharat's GST Ready Reckoner

            A Handbook on GST

Member: Indirect Tax Committee of CII, PHDCCI, MyGst.MyTax Foundation

Advisor – Industries Association of Chandigarh

Address: 3328, Sector 27 D, Chandigarh, India - 160 019

Phones: +91-172-461-3328, +91-98880-90008

Mail: keshavgarg@kdai.in