Centre’s Landmark GST Reforms Slash Rates for Cooperatives, Farmers and Rural Enterprises

The Government of India has unveiled sweeping reductions in Goods and Services Tax (GST) across critical sectors that directly impact farmers, cooperatives, rural entrepreneurs, and more than 10 crore dairy farmers nationwide. These reforms, announced under the NextGenGST initiative led by Prime Minister Shri Narendra Modi, aim to strengthen the cooperative sector, improve competitiveness, and provide affordable access to essential goods for millions of households.

Strengthening the Cooperative Ecosystem

The new reforms are designed to make cooperative products more affordable and competitive in both domestic and international markets. By lowering taxes across the farming, dairy, food processing, and logistics sectors, the government is ensuring increased demand for cooperative products, higher incomes for farmers, and the promotion of rural entrepreneurship. The move has been widely hailed by the cooperative sector, with major players like AMUL welcoming the reforms.

Direct Relief for Dairy Farmers and Consumers

One of the biggest beneficiaries of the reforms is the dairy sector, which supports over 10 crore farmers, many of them women. The following GST reductions have been implemented:

• Milk and Paneer: Complete GST exemption, whether branded or unbranded.

• Butter, Ghee, and Similar Products: Tax rate cut from 12% to 5%.

• Milk Cans (Iron, Steel, Aluminium): Reduced from 12% to 5%.

These measures will not only provide direct relief to farmers but will also make dairy products more affordable for consumers. By lowering the cost of essential nutrition sources, the reforms also support nutrition security for households while strengthening women-led rural enterprises, particularly self-help groups engaged in milk processing.

Boost to Food Processing and Household Items

The food processing sector, a key driver of rural employment and value addition, has also received significant tax relief. Major changes include:

• Cheese, Namkeens, Butter, Pasta: Reduced from 12%–18% to 5%.

• Jams, Jellies, Yeasts, Bhujia, Fruit Pulp or Juice-Based Drinks: Now taxed at 5%.

• Chocolates, Corn Flakes, Ice Creams, Pastries, Cakes, Biscuits, Coffee: Lowered from 18% to 5%.

This wide-ranging relief will lower household food expenditure, stimulate demand in rural and semi-urban markets, and boost growth for cooperatives and private enterprises alike.

Lower Costs in Packaging and Logistics

To further ease the burden on cooperatives and small producers, GST on packing paper, cases, and crates has been reduced to 5%. This reduction will decrease packaging and logistics costs, making supply chains more efficient and affordable.

Relief for Farmers through Tractors and Inputs

Farm mechanization has received a major boost with reductions in GST for tractors and components:

• Tractors below 1800 cc: Tax cut to 5%.

• Tractor Components (tyres, tubes, hydraulic pumps, etc.): Reduced from 18% to 5%.

This will lower equipment costs for farmers engaged not just in crop farming but also in animal husbandry and fodder production.

Fertiliser and pesticide inputs have also been rationalized:

• Key Fertiliser Inputs (Ammonia, Sulphuric Acid, Nitric Acid): Reduced from 18% to 5%.

• Bio-Pesticides and Micronutrients: Lowered from 12% to 5%.

This correction addresses inverted duty structures, reduces input costs, and promotes eco-friendly farming practices aligned with the government’s Natural Farming Mission. Small farmers and Farmer Producer Organizations (FPOs) are expected to benefit directly.

Cheaper Transportation and Supply Chain Efficiency

The logistics sector, the backbone of India’s agricultural economy, has also seen reforms:

• Commercial Goods Vehicles (Trucks, Delivery Vans): GST reduced from 28% to 18%.

• Third-Party Insurance for Goods Carriage: Reduced from 12% to 5% with ITC benefit.

Lower vehicle costs and reduced freight rates will make transportation of farm produce and dairy products more affordable, reducing logistics costs for cooperatives and improving export competitiveness.

Transformative Impact on Rural Economy

The combined impact of these reforms is expected to be transformative:

• Lower household food and nutrition costs.

• Higher incomes for dairy farmers, cooperatives, and rural entrepreneurs.

• Promotion of sustainable agriculture through affordable bio-pesticides.

• Stronger food processing and dairy industries.

• Reduced logistics and packaging costs across the supply chain.

These NextGenGST reforms mark a significant step toward empowering rural India, strengthening cooperatives, and ensuring inclusive growth. By aligning taxation with affordability, competitiveness, and sustainability, the government has created a ripple effect that benefits farmers, consumers, and industries alike.