GST on Agriculture Products

Deepshikha Nainani October 13, 2025

GST Exemptions on Agricultural Products

Different agricultural products and tools required for agriculture are subject to different rates of GST. The agricultural products that enjoy exemptions under the GST regime include seeds and organic manure until packed into unit containers and bearing a brand name and label. Essentially, any produce generated from cultivation or produced by agriculturalists is exempted under the GST laws.

GST Rate on Agriculture Products

While some agricultural products are exempted from GST, there are many others on whom varying GST rates are being applied. Under the GST regime, all goods and services are subjected to taxation rates of nil, 5%, 12%, or 28%. Read on below to learn the different agricultural products’ GST rates.

1. Nil GST Rate

Manually-operated or animal-driven agricultural implements.
Hand tools, including shovels, spades, hewing tools, and other similar tools used in agriculture, forestry, or horticulture.

2. 5% GST Rate

Hand pumps and their parts
Solar water heater and systems
Plants or devices for waste-to-energy
Solar lantern or lamps

3. 12% GST Rate

Power-driven pumps designed for handling water, including centrifugal pumps, submersible pumps, deep tube-well turbine pumps, axial flow and mixed flow vertical pumps.
Machinery required in horticulture, agriculture, or forestry industries for preparation or cultivation of soil or for lawn or sports-ground rollers.
Dairy and milking machinery
Machines used for composting
Self-loading or self-unloading trailers used for agricultural purposes
Other machinery for horticulture, agriculture, forestry, bee-keeping or poultry-keeping uses, including germination plants fitted with thermal or mechanical equipment, poultry incubators, brooders, etc.
Machinery for harvesting or threshing, including straw or fodder balers, hay or grass mowers, and machines for cleaning, sorting and grading eggs, fruit, or other agricultural produce

4. 28% GST Rate

Ceramic instruments used for laboratory, chemical, or other technical purposes
Ceramic troughs, tubs, and similar receptacles that have use in agriculture
Ceramic pots, jars, and similar items used for transporting or packaging goods.

Latest GST Amendments for Agricultural Products Effective from Late September 2025

The Goods and Services Tax (GST) system in India has witnessed significant updates, especially in the context of agricultural products. The latest amendments, effective from 22nd September 2025, were discussed during the 56th GST Council meeting and are designed to benefit farmers and promote agricultural sustainability. These changes aim to reduce input costs, encourage mechanisation, and ensure that farming practices remain competitive in the global market. Below, we explore the major updates on GST rates and their impact on agricultural products and machinery.

GST Rates on Agricultural Products

The GST on agricultural products has been categorised into different slabs to ensure that the rates are aligned with the nature of the product, its level of processing, and its market positioning. Here's a breakdown of the new GST rates:

Raw Agricultural Produce (0% GST)

Unprocessed agricultural produce such as fresh fruits, vegetables, grains, pulses, and milk continue to remain exempt from GST (0%). This exemption ensures that basic agricultural commodities remain affordable for consumers, and farmers continue to benefit from tax-free sales.

Processed and Packaged Foods (5% GST)

Processed foods such as sugar, edible oils, frozen vegetables, and UHT (ultra-high-temperature) milk now attract a GST of 5%. This category also includes items that undergo minimal processing but are packaged for sale in the market.

Branded and Packaged Agricultural Products (12% GST)

Branded and packaged items, including dry fruits, butter and packaged paneer, and ghee, are subject to 12% GST. This ensures that processed and branded products contribute to the tax revenue while allowing brands to benefit from standardised tax rates across the industry.

Processed Foods and Snacks (18% GST)

Products such as sauces, jams, pickles, and packaged snacks, which involve higher levels of processing and packaging, are now taxed at 18%. This higher GST rate reflects the value-added processing and packaging involved in such products.

Luxury and Sin Products (28% GST)

Luxury items such as carbonated beverages and tobacco products remain taxed at 28%. This high GST rate is aimed at discouraging consumption of non-essential luxury goods while raising funds for government schemes.

GST Rates on Agricultural Inputs and Machinery

A significant change in the latest GST amendments is the reduction in GST rates for farm machinery and inputs. These reductions are aimed at making farming more cost-effective and promoting mechanisation, which is crucial for increasing agricultural productivity.

Seeds for Sowing and Manual Farming Tools (0% GST)

Seeds and basic farming tools like ploughs, sickles, and shovels remain exempt from GST (0%), ensuring that essential inputs for agriculture remain affordable.

Farm Machinery (Reduced from 12% to 5% GST)

Agricultural machinery such as tractors, harvesters, fixed-speed diesel engines, hand pumps, and sprinklers now attract a reduced GST of 5%, effective from 22nd September 2025. This reduction is expected to significantly lower the cost of machinery, making it easier for farmers to adopt modern tools and technologies.

Fertilisers (5% GST)

Fertilisers continue to be taxed at 5%, ensuring that essential inputs for enhancing soil health remain accessible to farmers at a reasonable cost.

Pesticides and Agrochemicals (18% GST)

Pesticides and agrochemicals, which are critical for pest control, are taxed at 18%. This higher tax rate remains in place, reflecting the value-added processes involved in these products.

Additional Updates to Encourage Sustainable Farming

The latest GST updates also include measures to promote sustainability and reduce dependency on chemical-based farming practices:

Bio-pesticides and Micronutrients (Reduced GST)

To encourage the use of bio-pesticides and organic farming practices, GST on bio-pesticides and micronutrients has been reduced. This is part of a larger effort to shift towards more environmentally-friendly farming methods that reduce the use of harmful chemicals.

Dairy Products (Zero GST)

Dairy products like milk and cheese, which are essential components of the diet for many households, remain exempt from GST (0%). This is a significant relief for dairy producers and consumers alike.

GST Rationalisation for Integrated Farming

The new amendments also rationalise GST rates for integrated farming and allied activities, including animal husbandry, beekeeping, poultry farming, agroforestry, and fisheries. These sectors, which are integral to the agricultural value chain, will benefit from lower tax rates to encourage greater investment and productivity.

Cheaper Transportation of Farm Produce

With the reduction in GST on commercial goods vehicles, transportation costs for farm produce are expected to decrease. This will make it easier for farmers to transport their products to markets, improving supply chain efficiency and reducing the final cost to consumers.

New GST Slab Structure

A new GST slab structure has been introduced to simplify the taxation system and make it more transparent. The revised structure includes:

0%, 5%, 18%, and 28% GST Slabs

These slabs simplify the existing system, with most agricultural products falling under the 0%, 5%, or 12% tax brackets. However, items such as luxury goods and certain processed products have been placed in the higher 18% and 28% categories.

Introduction of a 40% GST Slab for Luxury Goods

The introduction of a 40% GST slab for luxury and sin products further streamlines the tax structure and aligns with global practices where high-end goods are taxed at a higher rate.

The Impact of These Changes on the Agricultural Sector

These amendments are expected to have a far-reaching impact on the agricultural sector. Here are some of the anticipated benefits:

Lower Input Costs

The reduction in GST on agricultural machinery, irrigation equipment, and bio-pesticides will help reduce the overall cost of farming, making it more accessible for farmers, especially small and medium-sized enterprises.

Promotion of Sustainable Practices

By encouraging the use of bio-pesticides and micronutrients, the government aims to reduce the dependency on chemical fertilisers, promoting sustainable agricultural practices that are better for the environment and public health.

Boosting Farm Mechanisation

The reduction in GST for farm machinery is expected to increase the adoption of mechanisation in agriculture, leading to higher productivity and efficiency. This is crucial for modernising the agricultural sector and ensuring food security for the growing population.

Improved Competitiveness of Domestic Agricultural Products

The rationalisation of GST on agricultural products, along with lower transportation costs, is likely to make Indian agricultural products more competitive in the global market, opening up new export opportunities and increasing farmers' incomes.

The recent amendments to the GST rules for agricultural products, effective from 22nd September 2025, represent a significant step forward in making agriculture more sustainable, cost-effective, and competitive. By reducing input costs, encouraging sustainable practices, and rationalising tax slabs, these reforms are poised to benefit both farmers and consumers alike, ensuring that the agricultural sector continues to play a vital role in India's economy.

Impact of GST on the Agriculture Sector

Goods and Services Tax aims to bring transparency to taxation systems across industries across the country. In the agriculture sector, the GST system seeks to ensure that the farmers get the best rates for their produce. This can be made possible by the agriculture sector adopting the transparency mechanisms that exist in the GST system for other industries.

The GST rate on agricultural products differs in terms of product categories. However, understanding the impact of GST on the agriculture sector first requires an understanding of how farmers are impacted by the GST.

Farmers need not be registered under GST: The GST Act exempts agriculturalists from GST registration and compliance requirements. Under the Act, the term “agriculturalist” is defined as:

“An agriculturalist” means an individual or Hindu Undivided Family (HUF) who undertakes cultivation of land:

By own labour
Through the labour of family, or
By servants paid in cash or kind, or by hired labour under the personal supervision of the individual or any family member.

Farmers need not collect GST: To collect GST, a taxpayer must have enrolled and registered under the GST registration system. Since most farmers are unlikely to be registered under the GST system owing to the lack of necessity of them being registered, they are not required to collect GST either.
Farmers need not file GST: The compliance established under the GST laws on agriculture products are only applicable to taxpayers who have registered under GST. For farmers who have not registered themselves under the GST system, there is no requirement for them to file a GST return.

Conclusion

The implementation of the GST taxation system has long been in the works in India. Different rates of GST for different agriculture products makes it evident that a lot of care has gone into deciding the different rates. Since “agriculturalists,” as defined under the GST Act, are exempt from paying GST, many farmers are not currently enrolled or registered under the GST system. However, it is important to remember that the GST taxation system has also been lauded for bringing in transparency to several other industries. Like all other sectors, the agricultural sector could also benefit from transparency in the sector, which could actually result in the farmers receiving the highest share, among all other stakeholders, in the sale of agricultural products.

FAQs

What are the new GST rates for agricultural products as of September 2025?

As of 22nd September 2025, the GST Council has revised rates for agricultural products. Raw produce like fruits, vegetables, grains, and milk remain exempt (0%). Processed foods such as sugar, edible oils, and frozen vegetables are taxed at 5%. Branded items like dry fruits, packaged paneer, butter, and ghee attract 12%, while processed snacks and sauces are taxed at 18%. Luxury items like aerated beverages and tobacco are taxed at 28%.

How has the GST rate on farm machinery changed?

GST on agricultural machinery has been reduced from 12% to 5% for items such as tractors with engine capacity up to 1800 cc, fixed-speed diesel engines, hand pumps, sprinklers, and harvesting equipment. This reduction aims to lower farming costs and promote mechanisation, benefiting small and medium farmers.

Are dairy products still exempt from GST?

Yes, dairy products like milk and cheese continue to be exempt from GST (0%). Additionally, GST on items like butter, ghee, and milk cans has been reduced from 12% to 5%, making dairy products more affordable for consumers and enhancing the competitiveness of indigenous dairy products.

What changes have been made to GST on bio-pesticides and micronutrients?

To encourage sustainable farming, the GST on bio-pesticides and certain micronutrients has been reduced from 12% to 5%. This move aims to promote the use of eco-friendly inputs, supporting the government's National Mission on Natural Farming and benefiting organic farmers and Farmer Producer Organisations (FPOs).

How will these GST changes impact the cost of farming inputs?

The reduction in GST rates on farm machinery, fertilisers, pesticides, and irrigation equipment is expected to lower the overall cost of farming inputs. This will make mechanisation and sustainable farming practices more accessible to farmers, leading to increased productivity and reduced dependency on chemical inputs.