GST impact on food grains: It is win-win-win situation for traders, FCI and Centre

The tax on goods and services (GST) has significantly reduced the country’s grain purchase tax rate, as well as correcting the huge disparity in fiscal consequences among the major grain-producing countries.

The development would reduce the tax burden on Food Food Corporation of India, whose operations are funded by the Center’s grant budget.

In addition, buyers, including private traders now have easier trade with surplus states because of fiscal responsibility is no longer a determining factor in their market decisions. Previously, taxes have played a significant role and have affected the buying preferences of traders.

For example, even if the Punjab was one of the largest producers of wheat and cereals often produced in excess of the amount, private traders procure grain from Uttar Pradesh, where taxes were much lower. These market-distorting fiscal disparities no longer exist in the GST regime.

Although VAT boxes and assortments are integrated with the GST (which is taken to zero in grain purchases), only small samples, such as market, rural development rates and arthia commissions or businesses, are now paid by buyers Of grains.

In Andhra Pradesh, for example, the impact of taxes and other taxes on rice supply is now 3.12%, compared with pre-GST 13.12%.

The southern state, which makes the rice for the stock exchange basins, which is used to impose value added tax (VAT) and the rural development quota of 5% each in the purchase price of grain , Which had been abandoned under the GST.

Similarly, Punjab, taxes on purchases of rice and wheat fell by 14.5% to 6.5%, while for Haryana, taxes decreased by 6.5% compared with 11.5%.

And in Madhya Pradesh, one of the major contributors to wheat stocks in the center, government and private grain purchases increased from 4.32% to 9.32%.

“In addition to VAT, various provisions such as infrastructure and rural development imposed by the state in the purchase of grain governments have been integrated with the GST,” said an official of the FA. The Board decided GST to fully compensate the states for any loss of revenue under the GST in the first five years of operation.

Reducing grain supply taxes would help FCI, which buys about 50-55 million tonnes of wheat and rice per year from major producing countries.

TPI had paid taxes of about Rs.10 trillion annually in recent years and the savings of the GST could be about 7,000 CRORE annually.

A recent publication titled “Obtaining Punjab agriculture, on the path of great growth” by Ashok Gulati, Ranjana Roy and Siraj Hussain noted that the Punjab government was accused of heavy commissions / taxes on the purchase of wheat and rice, or 14.5%, which is much higher than 2% in Gujarat and West Bengal.

“This makes the food industry extremely reluctant to buy their raw materials from Punjab,” the report said.