GST rollout: Tax on farm implements, fertilisers and pesticides spooks farmers, industry alike

Punjab accounts for 25 per cent of the country’s Rs 40,000-crore farm implements manufacturing industry, including the Rs 24,000-crore tractor manufacturing industry.

Written by Anju Agnihotri Chaba | Jalandhar | Published:July 1, 2017 8:44 am
gst rollout, arun jaitley, gst, gst council meet, fertiliser tax, tractor tax, gst rates, business news, indian express So far, there was no tax on them in Punjab.

The imposition of Goods and Services Tax (GST) on farm implements, fertilisers and pesticides, on which there was no tax earlier in Punjab, has increased worries of farmers and also caused apprehension among farm implements manufacturing industry in the state as well as small dealers selling fertilizers and pesticides.

Punjab accounts for 25 per cent of the country’s Rs 40,000-crore farm implements manufacturing industry, including the Rs 24,000-crore tractor manufacturing industry.

The farm implements manufacturing industry in Punjab has an annual turnover of around Rs 4,000 crore while the figure is Rs 6,000 crore for the tractor manufacturing industry.

Similarly, fertilisers and pesticides worth Rs Rs 3,800-4,000 crore are used in Punjab annually.

There are nearly 6,100 farm implements manufacturing units across the state, including 100 of medium scale, 1,000 small scale and around 5,000 micro units at the village level. Micro units make small implements such as tillers, harrows, various types of cutters, diggers etc. while small-scale and medium units manufacture big implements like combine harvesters, tractor-trolleys, rotabators, thrashers along with several types of small implements too.

“Our profit margins, which are very low at 8-9%, will either come down further or be wiped out,” said a representative of Vishkarma Agro Engineering in Jandhu Singha village near Jalandhar. “Small manufacturers like us who are having Rs 15-25 lakh annual turnover would be finished as we cannot afford to meet the conditions of GST,” he said.

Only 10 to 15 per cent of farm implements manufactured in Punjab are sold in the state, while the rest are supplied to other states, said Sarabjit Singh, a partner in Dashmesh Mechanical Works, which is a big manufacturing unit near Nabha that has been producing a large number of combine harvesters, rotabators and other farm implements along with nearly 55,000 types of spare parts of different implements since 1965.

Singh said big units like them, which also supply to big companies, know the taxation system but it would be a web for the small manufacturers. He said many even might have to shut down.

“When farmers are already are not having capacity to pay for tax-free and subsidised goods, GST on farm implements is going to be a big setback,” said another small manufacturer Avtar Singh from Talwandi Singhwala.

Baldev Singh Amar, chairman of All India Agriculture Mechanical Machinery Association (AMMA) and president of Punjab State Agriculture Industry Manufacturer Association (PSAIMA), who has been running Amar Agriculture Machinery Unit in Ludhiana since 1970, said high GST on farm implements would either stop the industry growth, which is 5-7% annually currently, or lead to a negative growth rate as farmers would prefer more “custom hiring” system under which a single set of implements would be used by various farmers on rental basis.

“On one hand, the government is encouraging mechanical agriculture by promoting subsidy on farm implements, even up to 30 to 40 per cent on several. On the other hand, huge taxes are being imposed. This is a counter-productive policy of the government,” he said.

“It will hamper innovation in the industry. Why would one spend so much money on research/experimentation to develop new implements when market chances are bleak in the high tax scenario,” said Baldev Singh Amar.

Farmers in Punjab who have never paid tax on farm inputs will never accept this new tax, he said. “If our buyers are going to be stressed, our industry will have to bear the brunt,” said Amar, adding that the impact would be clear only after three or four months.

Manmohan Kalia, joint director of agriculture engineering at Punjab’s Agriculture Department, said that in various meetings with the Centre, the Punjab government had given in writing that there should be no GST on farm implements. “We will take up the matter again,” he said.

Fertilisers and Pesticides

Of the 13,000 dealers and supplier of fertilizers and pesticides in Punjab, 60 per cent are small ones working at the village level. “We apprehend that several small and marginal farmers already under huge debt will leave farming. They are already taking fertilizers on credit and now even small dealers at the village level cannot afford to provide them on credit due to increasing costs,” said Mohinder Pal Singh Khalsa, president of Seeds, Pesticides and Fertilisers Association (SPFA), Punjab.

He said their association had also submitted memorandum in the name of Prime Minister Narendra Modi, demanding repeal of the decision in the interests of dealers and farmers.

So far, persticides and fertilisers have been tax-free. Sanjeev Kumar of Arvee Fertilizers Store said small trader in this business would also be forced to shut shop.

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