4 WAYS IN WHICH GST WILL USHER IN SEASONS OF BOUNTY FOR INDIAN AGRICULTURE

HuffPost, Published: 20th Sept 2017

GST is poised to double farmer income, reduce wastages & positively contributes to the exchequer

INTRODUCTION

The introduction of the Goods & Services Tax (GST) adds to the slew of significant economic reforms undertaken by the Government in its vision of ‘One Economic India’. While the benefits of GST will be reflected across sectors, the farm and agricultural sector, in particular, will reap a bountiful harvest.

Farm, food and agribusiness have traditionally been subject to multiple levels of taxation from input to the end product. Further, multifarious, ad-hoc taxes and levies imposed by State Governments have created a highly fragmented market structure, affecting interstate movement of goods, worsening serious & scalable private trade and impacting investment in the sector. Simplification and uniformity of taxes across States supported by a robust synergy through co-operative federalism is therefore a much welcome move for the agricultural sector.

FARM PROCUREMENT & TRADE

I believe that the implementation of GST will have a positive cascading effect across the value chain from farm to the consumer’s plate. Much to the delight of farmers, agricultural income, production and sale of farm produce remain outside the ambit of the taxman. The GST for farm produce, for example, has been kept at zero percent. Other food products have been grouped in the lowest tax bracket thus keeping revised tax rate under GST similar or lower than the previous tax structure.

Although the Central Government has never brought farm produce within tax ambit, the State Government and local authorities had imposed multiple cess-charges, levies and VAT, thus creating a revenue generation opportunity for them. With the introduction of GST, taxes levied by other stakeholders will be subsumed and trade distortions will be removed.

Effectively, GST will do away with taxation aberrations in some States, creating a multiplier effect across the agriculture value-chain from farm to fork. It will further act as a fillip to organized food processing thus enabling increased investment through larger market participation by private players.

ONE NATION ONE MARKET ~ Doubling Farmer Income

A unified tax system will be critical to a unified agricultural market. e-NAM, the National Agricultural Market (NAM) portal, aimed at unification of formal and informal agricultural produce markets across States, offers a platform for farmers to gain access to multiple buyers across participating states. It also intends to remove bureaucratic licensing and multiple taxation hurdles harassing private trade.

The implementation of GST will help facilitate NAM by boosting investment in logistics thus improving marketing efficiency and promoting interstate trade. GST will help to create a transparent supply chain that will empower the farmer, provide him wider access to markets and enable free trade across the country thus helping to double farmer income.

HIGHER PROCESSING, LOWER WASTAGE

It is increasingly being recognized that encouraging food processing will boost India’s horticultural production, generate significant farm revenue and lead to savings for stakeholders across the value chain. The food processing sector will particularly benefit from the interstate logistics enablement as well as the regulatory and fiscal boost provided by the GSTHowever, the decided rates for some processed product categories may require reconsideration in line with the Government’s own stated agenda of reducing farm losses and food wastages.

ENHANCING EXPORT COMPETITIVENESS

Standardization and rationalization of taxes will incentivize agricultural and food exports. By directly linking farmers with exporters across the nation, GST will ensure fairness in farmer remuneration and bring domestic price stability. Improved market linkages will result in lower production and procurement costs thus help making Indian agricultural produce globally competitive. For instance, classifying poultry and seafood in low GST slabs is a good step to boost exports.

CONCLUSION

Tax uniformity across States will enable framing and providing tax policy support for commodities. Tweaking of taxes at the Centre for commodities will translate into seamless input credit, eventually reducing end consumer prices. There may be initial teething problems but purging India’s agriculture and its agro logistics sector of the complexities of the multi-layered tax regime will increase transparency and promote competition amongst private players and states alike. GST will provide impetus to ease of doing business, attract higher private and public investment in agri infrastructure and will be instrumental in reviving Indian agriculture. Barring initial birth pangs, GST is indeed a win-win for farmers, industry and consumers alike.

– By Rana Kapoor, Contributor MD & CEO, YES BANK

Source: https://www.huffpost.com/archive/in/entry/4-ways-in-which-gst-will-usher-in-seasons-of-bounty-for-indian-agriculture_a_23215874

i

Related Posts

CAN BUDGET 2018 PLUG THE SOCIAL SECTOR SPENDING GAP?

HuffPost, Published : 31st Jan 2018 With Union Budget 2018 round the corner, the intent of the government may well be to increase allocation into social sectors, but there could be constraints in opening the purse strings due to fiscal concerns and lower than expected...

GST: SHORT-TERM PAIN WILL BE OUTWEIGHED BY MULTIPLE GAINS

HuffPost, Published: 12th July 2017 As India begins implementing the biggest ever overhaul of its indirect tax architecture, through the Goods and Services Tax (GST), I expect significant benefits to accrue in the medium-term through the creation of a unified market,...

7 REASONS WHY DEMONETIZATION IS A MASTERSTROKE BY MODI

HuffPost, Published: 10th Nov 2016 I emphatically welcome the government's decision to demonetize ₹500 and ₹1000 currency notes in circulation in the economy as bold and revolutionary, and one that will have tectonic impact on the ubiquitous parallel economy in the...