The tax regime is set to enter agricultural land, so far exempt from taxation. From June 1, income from all agricultural land that has been rented or leased out – which means that the owner himself does not plough the land and sells its products for him or herself, but has contractual farmers – will have to pay GST at the rate of 18 per cent. This will have to be paid by the owner of the land.
Not only is the GST a confusing and complicated tax structure, its entry into the farm sector would immediately mean that prices of farm products would jump to record levels. It will also mean that farmers who had been on the brink of committing suicide because of no return on investment and mounting debt will now be even closer to death. It also means that the government’s minimum support price for farm produce will make no sense at all, tagged with 18 percent GST in some cases and nil GST in certain others.
This can only be a recipe of disaster and there is already huge resentment about this growing.
GST, which was started with much fanfare on July 1 last year, has failed to address the total confusion it has generated within the MSME sector, with GST rates in most products far exceeding existing VAT rates. The entire system was put in force without any detailed study of ground realities and the paperwork involved in this has grown manifold.
Talking about paperwork, these owners will now have to file GST returns as well. For that, of course, they will have to hire chartered accountants, or at least qualified accountants who will certainly charge them a packet. That amount will be added to the overall produce price as well, further skyrocketing the prices. One has to remember that there are several return filings in GST per year. And the government, of course, feels that a poor, illiterate or semi-literate pheasant can understand the complicacies of GST filing.
These will be staring in Punjab and Madhya Pradesh for certain, and other states will have to follow suit immediately, because GST has a nation-wide structure, without which input benefits cannot be calculated or acquired.
Tax experts have opined that once a farmer is in one tax net, it he/she will soon be in others, such as income tax, from which he has been exempt so far.
The problem with small farmers will rise. It has been said that if a farmer has a meagre 2-3 acre of land, he/she will not be able to make ends meet on returns from this small patch. Hence what he generally does is lease out the land to another farmer while he himself takes up other vocations to supplement his income. The entire tradition would be hit so hard that living for marginal farmer would become impossible, say farm leaders.
This is a disaster waiting to happen.
—India Legal Bureau