GST 2.0 and its Impact on Agriculture Sector in 2025
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- by MI September 18, 2025
The agriculture sector has always been central to India’s economy, providing livelihoods to millions of farmers and ensuring food security. With the rollout of GST 2.0 in 2025, the way agricultural inputs, equipment, and services are taxed has seen major changes. This has direct implications for farmers, traders, exporters, and agri-tech startups. Let’s explore how GST 2.0 affects the sector in detail.
GST 2.0 Rates on Agricultural Products and Services
| Category | Before GST 2.0 | After GST 2.0 (2025) |
|---|---|---|
| Seeds | Exempt | Exempt (No GST) |
| Fertilizers | 12% | 5% |
| Farm Equipment (Tractors, Irrigation) | 18% | 12% |
| Cold Storage & Warehousing | 18% | 5–12% |
| Processed & Packaged Foods | 12–18% | 5–12% |
Positive Impacts of GST 2.0 on Agriculture
- Lower input costs: Fertilizers and machinery now attract lower GST rates, reducing farmer expenses.
- Boost to exports: Faster GST refunds support agri exporters and improve global competitiveness.
- Encouragement for agri-tech: Startups in agri-supply chain benefit from simplified compliance and digital GST filing.
- Efficient logistics: GST 2.0 removes tax barriers for interstate movement of agricultural goods.
Challenges for Farmers and Agri Businesses
- Smaller farmers may still struggle to claim Input Tax Credit (ITC).
- Higher tax on certain processed goods increases consumer prices.
- Complex compliance rules affect rural businesses with limited digital literacy.
- Frequent updates under GST 2.0 may require professional support for agri traders.
Compliance Tips for Agriculture Businesses under GST 2.0
- Use GST-compliant invoicing software for easy ITC claims.
- Keep separate records for exempt and taxable agricultural goods.
- Train staff and farmers on GST 2.0 filing and refund procedures.
- Leverage government schemes that provide subsidies on digital compliance tools.
Future Outlook for Agriculture under GST 2.0
By lowering tax rates on fertilizers and machinery, GST 2.0 aims to improve farmer profitability and encourage mechanization. At the same time, compliance remains a challenge for small-scale farmers and traders. As India moves towards digital agriculture, GST 2.0 could play a major role in creating a transparent, efficient, and farmer-friendly tax regime.
Conclusion
The impact of GST 2.0 on agriculture sector in 2025 is largely positive, especially for input costs and exports. However, small farmers need awareness and digital tools to benefit fully from the system. The key lies in training, adoption of GST-ready software, and better supply chain management to ensure agriculture thrives under the new GST era.
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