GST homing in on the agriculture sector

One of the biggest sectors of the Indian economy is the agricultural sector. The farmers are exempt from the payment of taxes on the agricultural income and the status quo is likely to be maintained when the GST comes into effect from the 1st of July. However, there are a number of industries that are benefitting under the garb of agriculture and that are what the government is targeting. The noose is slowly being tightened to enlarge the tax base. As more and more people start paying the taxes the true potential of the biggest tax reform since Independence, is going to be realised.

The latest area that has been brought under the aegis of the Goods and Service Tax is contractual farming. Many of the big retail chains give contracts to the farmers to grow specific agricultural products that find their way to the shelves in the malls. The people who track the industry are of the opinion that now the GST would be applicable on contractual farming. The quick service restaurants, popularly known as the QSRs and some of the multinational burger chains are known for allocating contracts for potato farming. All these will come under the purview of GST.

The next target is the middlemen who trade in the agricultural commodities. The small traders who are selling the agricultural products are likely to be reviewed for payment of the GST. As a recent development, the government has come out with the clarifications on the agricultural products. The farmers who have traditionally remained with their profession of farming are not required to register for GST.

The second session of the Budget session commenced from the 9th of March in the Parliament. Prime Minister Narendra Modi has categorically stated that a breakthrough is expected in the GST as the states have extended their cooperation. It is quite likely that the CGST and IGST laws that have been cleared by the GST council will be approved by the Parliament in the running session. The SGST will be taken up for approval in the State legislatures.

The effects of demonetization are fading out gradually. There was a lot of spread in the results of the industry in the quarter ending December 2016. The automobile, cement and consumer essentials seem to have weathered the storm. Some impact may be there on the order booking for industrial units but there is optimism in the capital goods and infrastructure sector. The results at the end of the March quarter are expected to be better.

With the UP and Uttarakhand election mandate going in favour of the BJP, the position of the Central government has strengthened. This will boost the confidence among the businessmen to make investments. This will also give a fillip to the global investment that is coming into India in the form of FDI. With all these possibilities now visible, the government initiatives to enlarge the tax base will be well supported. The taxation of the agricultural commodity trading and contractual farming seems to be a right step in this direction.

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