The five-year tax holiday for Farmer Producer Organisations (FPOs) with turnover of Rs 100 crore, announced by Finance Minister Arun Jaitley in his Budget speech on Thursday, addresses a longpending demand and is aimed at helping the farmers get better prices for their produce.
FPOs, which have started to come up only recently, are currently taxed at 30 per cent. These organisations have been claiming that this is a regressive measure, especially since it is the first time that farmers are embracing the corporate culture. Jaitley acknowledged the positive role played by these FPOs and announced 100 per cent tax deduction for companies with turnover below Rs 100 crore.
“In order to encourage professionalism in post-harvest value addition in agriculture, I propose to allow hundred per cent deduction to these companies registered as Farmer Producer Companies and having annual turnover up to Rs 100 crore in respect of their profit derived from such activities for a period of five years from financial year 2018-19. This measure will encourage ‘Operation Greens’ mission announced by me earlier and it will give a boost to Sampada Yojana,” said Jaitley.
FPOs are corporate entities which are registered under Section 465 (1) of The Companies Act of 1956. While they work under the principles of a cooperative society, their registration under The Companies Act provides more accountability and professionalism. Like corporates, FPOs, which are also referred to as Farmer Producer Companies (FPCs), are required to file returns. The introduction of the Goods and Services Tax (GST) had hit these farmers’ bodies hard as most of them deal with soyabean, the only agri commodity to be taxed under GST at 5 per cent.
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Maharashtra, where the FPO movement started a few years ago, accounts for a fifth of the nation’s FPOs with 1,341 such companies. MahaFPC, the apex body of the FPCs, acts as the interlocutor with policy makers. Yogesh Thorat, managing director of MahaFPC, said it also works for capacity building among members.
FPCs act as sub-agents for government agencies and for procuring agri-commodities of their members under various government schemes. Many have diversified their business portfolios and have entered the export markets, especially in horticultural crops.
Last year, MahaFPC monitored procurement of over 3 lakh quintals of tur dal in the state, and the total turnover of the purchase was estimated at over Rs 167 crore. Commodities of 26,803 farmers were handled in the operation, 95 per cent of whom were small and marginal farmers. Around 50 per cent of the FPCs in the state have cleaning and grading facility which allows them to add value to agri-produce.
Thorat said about 80 per cent of FPCs have turnover below Rs 1 crore, and just around 1 per cent of FPCs have turnover above Rs 10 crore. “So this exemption is surely going to help almost all the operational FPCs in the state,” he said.