In a significant move to bolster the nation's agricultural backbone, the government has announced a sweeping reduction in Goods and Services Tax (GST) rates across a wide spectrum of farming-related products. The decision, finalised at the 56th GST Council meeting, is designed to provide major relief to farmers by lowering their input costs, promoting mechanization, and stimulating demand. This comprehensive tax cut, effective from September 22, 2025, covers everything from tractors and fertilizers to irrigation equipment and dairy products, marking one of the most substantial support packages for the sector in recent years.
Central to the reform is a concerted effort to make modern farming equipment more affordable, particularly for India's small and marginal farmers who constitute 86% of the farming community. The GST rate on tractors (below 1800cc) has been slashed to just 5%, a move expected to accelerate the pace of mechanization at a time of rising rural labor costs. This reduction extends deep into the supply chain, with GST on crucial tractor components like tyres, tubes, and hydraulic pumps also brought down to 5% from 18%.
Furthermore, the council has targeted modern irrigation solutions to encourage water efficiency. The GST on sprinklers, drip irrigation systems, and harvesting machinery has been cut from 12% to 5%. In a push towards sustainable energy, the tax on solar power machinery used for irrigation has also been reduced to 5%, making green technology a more viable option for farmers.
The reform package addresses a long-standing demand from the fertilizer industry by correcting a critical inverted duty structure. The GST on key raw materials for fertilizers, such as ammonia, sulphuric acid, and nitric acid, has been cut from 18% to 5%. This brings the tax on inputs in line with the tax on the final product, which is expected to rationalize costs for manufacturers and, in turn, benefit farmers.
In alignment with the government's push for sustainable agriculture, the GST on bio-pesticides and several essential micronutrients has also been reduced from 12% to 5%. This measure is aimed at directly supporting organic farmers and promoting the adoption of natural farming practices across the country, making eco-friendly inputs more cost-effective.
The benefits of the GST overhaul extend beyond the fields to encompass the entire agricultural ecosystem. The dairy sector has received a major boost, with GST on milk and paneer being completely abolished, while rates on butter and ghee have been reduced to 5%. To support the processing and storage infrastructure, the tax on steel and aluminium milk cans has also been lowered.
The reforms also aim to enhance value addition and reduce post-harvest losses. The GST on processed fruits, vegetables, and nuts has been cut to 5%, a move designed to attract investment in food processing and cold storage facilities. This support extends to aquaculture, with GST on preserved fish reduced, and to forest-dependent livelihoods, with the tax on natural honey and tendu leaves—a key source of income for tribal communities—slashed from 18% to 5%. By also reducing GST on commercial goods vehicles, the government aims to lower logistical costs, ensuring that the benefits of this reform reach from the farm gate to the final consumer.
· Broad-Based Tax Relief: The GST Council has announced significant rate reductions across the agriculture and allied sectors, including on tractors, fertilizers, irrigation equipment, and dairy products.
· Boost to Mechanization: GST on tractors and their components has been slashed to 5% to make modern machinery more affordable for small and marginal farmers and to encourage mechanization.
· Lower Input Costs: The reform corrects the inverted duty structure for fertilizers by cutting GST on raw materials and reduces the tax on bio-pesticides, lowering overall farming expenses.
· Support for Allied Sectors: The overhaul provides relief to dairy, food processing, aquaculture, and forest-based livelihoods, aiming to boost the entire agricultural value chain.
