5 ways the GST overhaul will boost farmer incomes and cut costs

The Government has streamlined the Goods and Services Tax (GST) structure from four distinct slabs to two primary rates of 5 percent and 18 percent, along with a 40 percent rate for luxury goods. As part of this GST reform, key agricultural inputs and machinery have been shifted to the 5 percent bracket, benefitting farmers, especially those practising organic and sustainable farming. 

Here are five ways in which farmers stand to gain from GST reforms:

1. Lower Input Costs and Mechanisation

The reforms reduce GST on tractors (under 1800 cc) and related parts such as tyres, hydraulic pumps, and accessories from 12-18 percent to 5 percent. Similarly, irrigation tools like drip systems and sprinklers, as well as farm equipment for soil preparation, threshing, harvesting, mowing, and composting, will now attract the lower 5 percent rate.

This tax reduction decreases upfront costs for small and marginal farmers, making mechanisation more affordable. This is expected to result in wider technology adoption, including using balers to mitigate crop burning and enhanced productivity through mechanised operations.

For a state like Punjab, with very high farm power availability, cheaper machines can further reduce labour costs, improving margins even when MSP gains are capped.

Also Read: Seven engineers who quit jobs for new-age farming and now earn in lakhs

2. Boost for Sustainable and Organic Farming

In a milestone for green agriculture, GST on 12 key bio-pesticides and micronutrients has been cut from 12 percent to 5 percent. This applies to popular biological agents like Trichoderma, Pseudomonas fluorescens, Bacillus species, neem extracts, and other eco-friendly inputs integral to Integrated Pest Management.

Reduced taxation bridges price disparities between eco-friendly biological inputs and conventional chemicals, leading to greater adoption of sustainable agriculture.

This is expected to enhance soil health, promote biodiversity, and support long-term resilience in agriculture.

Also Read: How this UP farmer's son set up Rs 3 crore biofertilizer business

3. Dairy, Fish and Honey: Inclusive Benefits

GST reductions extend beyond crop farming. Daily-use items like milk and dairy products, including butter, ghee, paneer, cheese, and condensed milk, are now taxed at 5 percent. This move is projected to benefit around 80 million dairy farmers by boosting affordability for consumers and incomes for producers.

Similarly, processed fish products and natural and organic honey, vital for aquaculture and rural self-help groups, will also enjoy the 5 percent GST rate, supporting beekeepers, tribal communities, and enhancing livelihoods.

4. Financial Uplift for Farmers

By lowering the cost of inputs such as fertilisers, bio-pesticides, farm machinery, and dairy goods, these reforms reduce cultivation expenses, directly improving farmer income margins.

GST mandates such as invoicing and return filing are leading the agricultural sector toward digitisation. This shift improves transparency, enhances transaction traceability, and helps agricultural producers gain access to formal credit like bank loans. Overall, it will boost affordability and financial inclusion.

5. Strategic Support for Green Organic Transition

These tax reforms align with broader government initiatives like the Paramparagat Krishi Vikas Yojana (PKVY) and the Mission Organic Value Chain Development (MOVCDNER), which promote cluster-based organic farming and certification systems. Lower input costs now complement these schemes, making the organic transition more viable financially.

Organic produce often commands higher market prices both domestically and globally—so by lowering input costs and aligning with sustainability programs, farmers have a better chance of earning premium incomes while supporting ecological health. 

Also Read: MBA quits MNC job for organic farming; now sells chemical-free food products across India

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