GST relief for farmers as tax on retreaded tractor tires reduced to 5% from November 1

New Delhi: As the winter crop sowing season gathers pace, the government has announced changes in the Goods and Services Tax (GST) rules that could offer relief to farmers.

According to a Finance Ministry notice issued on October 27, the measures include a 5% tax rate on retreaded tractor tires and clarification of the tax treatment of certain fertilizers and seaweed-based products. The changes, which will come into effect on November 1, could help reduce the tax burden on some agricultural inputs.

The changes also include new tax compliance requirements for businesses dealing in used cooking oil, plastic waste, scrap tyres, scrap metal and e-waste.

Quick answers to key questions

•5 QUESTIONS

GST on retreaded tractor tires is coming down from 18% to 5% from November 1. The lower rate is intended to make them more affordable for farmers.

No. The 5% rate applies to retreaded tractor tires only. Other retreaded or used rubber tyres, including treads and tire liners, continue to attract 18% GST.

Biostimulants based on seaweed extracts fall under the 5% GST category for prepackaged and labeled animal, plant and organic fertilizers if registered under the specified Fertilizer Control Regulation.

A registered business purchasing specified goods, including used cooking oil, plastic waste, scrap tyres, scrap metal and e-waste, must pay GST under the reverse charge mechanism.

Eligible businesses registered in one state can use an e-commerce operator’s warehouse as their principal place of business to register in another state, even without a physical presence there. The facility requires operator approval and is subject to a monthly output tax liability limit of ₹2.5 lakh on specific sales to registered buyers.

The notification follows the recommendations from 57 GST Council meeting in New Delhi on October 8. Mint announced these proposed changes on October 15.

Cheaper tires for tractors, fertilizers

Under the revised rules, GST on retreaded tractor tires will be reduced from 18% to 5%, while other retreaded or used rubber tyres, including tire treads and liners, will continue to attract 18% GST. Retreading involves repairing a worn tire by replacing its outer tread, allowing it to be reused. The move is expected to benefit small and marginal farmers who prefer to buy used or retreaded tires as they are cheaper.

“The reduction in GST on retreaded tractor tires is a welcome move as small and marginal farmers often look for ways to reduce maintenance costs of farm machinery. Retreaded tires are generally a more affordable alternative to new ones and a lower tax rate could improve their affordability,” said Rakesh Arrawatia, Professor at the Institute of Rural Management Anand (IRMA) and Dean of the School of Cooperative Banking and Finance.

According to the latest available agricultural census data (2015-16), India had 126 million small and marginal operating enterprises. Of these, 100.2 million were marginal holdings (less than one hectare), while 25.8 million were small holdings (one to two hectares).

The government has also clarified the tax treatment of certain fertilizers. The 5% GST category for pre-packaged and labeled animal, vegetable and organic fertilizers will include biostimulants based on seaweed extracts if registered under the specified Fertilizer Control Regulation. Biostimulants are products used to increase the effectiveness of nutrients and promote crop growth.

Read also | What do GST Council’s latest tax cuts mean for farmers?

The notification also specifically includes psyllium seeds, commonly known as isabgol, in the applicable GST rates. However, the notification does not by itself fix the new tax rate for the product.

In addition, the government has introduced changes in the way GST is treated on transactions involving certain types of waste and scrap, including used cooking oil, plastic waste, discarded tires, scrap metal and electrical and electronic waste.

Under the updated reverse charge mechanism, registered businesses purchasing these specified goods from unregistered suppliers must pay the tax themselves, shifting the responsibility for payment from the seller to the buyer. A separate rule applies to purchases of these mentioned goods between registered entrepreneurs. The designated buyer now has to deduct tax at source (TDS) and deposit it with the government.

The notifications also remove exemptions from GST registration for businesses dealing in these specified categories of waste and scrap. Suppliers of these goods are no longer exempt and must re-register under the appropriate GST rules.

Cross-border online sales

In a separate change aimed at making compliance easier for small online sellers, the government has allowed eligible businesses registered in one state to obtain GST registration in another state where they do not have a physical presence, using the e-commerce operator’s warehouse as their principal place of business.

The device is subject to certain conditions, including the consent of the e-commerce operator and a monthly output tax liability limit of ₹2.5 million for specific sales to registered buyers. The operator must respond to the consent request within seven working days. This change could make it easier for small retailers to stock and sell goods through online marketplaces across state lines without having to set up a physical location in each state.

In addition, the government has expanded the e-invoicing rules to include imports of services and supplies purchased from unregistered sellers under the reverse charge mechanism. This change will come into force on 1 January 2027 to give businesses time to adapt to the new compliance requirements.

“The latest changes seek to make registration faster, refunds faster and credits collected more accessible, while tax administration gradually moves towards process-driven systems. Streamlined cross-state registration through e-commerce operators’ warehouses could lower the entry barrier for smaller sellers looking to expand across states,” said Manoj Mishra, partner and head of tax controversies at Grant Thornton Bharat.

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