Updated 8:04 am, Apr 28, 2021

GST: Zero duty will help farmers but blow hole in state coffers | SNE

May 20, 2017


Zero duty for all primary produce — from foodgrains, oilseeds, fruits & vegetables, sugarcane/gur, milk and spices, to fish and meat — under the Goods and Services Tax (GST) regime may be a shot in the arm for Indian agriculture and farmers.

But the decision, approved at the two-day meeting of the GST Council that ended in Srinagar Friday, could blow a hole in the finances of many states.

Punjab, for instance, currently charges a 5 per cent value added tax (VAT) on both wheat and paddy. In addition, it imposes an infrastructure development cess of 3 per cent, a rural development cess of 2 per cent and a market fee of 2 per cent.

The total state levies on the basic grain purchase price — not counting the 2.5 per cent fee payable to commission agents (arhtiyas) — thus comes to 12 per cent.

Taking aggregate wheat arrivals of 11.90 million tonnes (mt) and 16.60 mt of non-basmati paddy from the 2016-17 crop in Punjab’s mandis, the 12 per cent levy at the corresponding minimum support prices of Rs 1,625 and Rs 1,510 per quintal for the two grains would have generated revenues of over Rs 5,300 crore for the state government.

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