GST Council May Cut Tax on Farm Inputs, Exempt Seed Storage

The GST Council is likely to consider a package of agriculture-focused tax changes at its October 8 meeting, including an exemption for the storage and warehousing of seeds meant for sowing, a lower GST rate on retreaded tractor tyres and a uniform 5% rate for registered bio-stimulants. The proposals are aimed at reducing the tax burden associated with farm inputs and resolving differences in how certain agriculture-related products and services are currently treated under GST.

The proposed measures would also include a nil GST rate for psyllium seeds, commonly known as isabgol, and an exemption for coffee-curing services supplied to farmers. None of these measures should be treated as final yet: they are proposals being considered ahead of the 57th GST Council meeting, which was rescheduled to October 8 from October 7. The Council’s final recommendations could differ from the proposals currently being reported.

Key takeaways

• The GST Council is expected to discuss agriculture-related tax relief on October 8.
• Storage and warehousing of seeds meant for sowing could become GST-exempt.
• Grading, treatment and packing would reportedly no longer prevent eligible sowing seeds from receiving the warehousing exemption.
• GST on registered bio-stimulants could be standardised at 5%.
• Retreaded tractor tyres could see GST fall from 18% to 5%.
• Psyllium, or isabgol, seeds could receive a separate nil-GST entry.
• Coffee-curing services supplied to farmers could also become exempt.
• The proposals are designed to reduce input costs and provide greater clarity to farmers and businesses.
• The changes are not yet approved and remain subject to the GST Council’s decision.

Why agriculture is back on the GST Council agenda

The latest proposals represent another attempt to make India’s GST structure more consistent with the economics of agriculture.

Farmers do not buy only seeds and fertilisers. Modern cultivation also depends on storage, machinery, tractor components, tyres, crop-treatment products, irrigation equipment, transportation and processing services.

A tax applied at any stage can ultimately increase the cost of cultivation if it cannot be fully absorbed or recovered within the supply chain.

The proposals now under consideration target some of those less obvious costs.

Seed storage is one example.

Seeds intended for sowing can qualify for favourable GST treatment, but the associated storage and warehousing services have faced a different tax treatment when the seeds undergo processes such as grading, treatment or packing before reaching farmers.

The proposed change would attempt to remove that distinction.

Seed storage could become GST-free

One of the most significant proposals is to exempt storage and warehousing services for seeds meant for sowing.

The issue arises because seeds can undergo processing before reaching farmers.

According to government sources cited by Moneycontrol, activities such as grading, treatment and packing have prevented the storage and warehousing of these seeds from receiving the exemption that applies to the underlying agricultural product.

The proposed change would effectively recognise the commercial reality of the seed supply chain.

A seed does not necessarily move directly from producer to farmer.

It can be collected, cleaned, graded, treated, packed and stored before being distributed according to the agricultural season.

Taxing the storage stage can therefore add to the cost of preparing seed for the farmer.

Removing GST from eligible storage and warehousing could lower that cost, although the eventual benefit to farmers will depend on how much of the tax saving is passed through the supply chain.

Why seed storage matters to farmers

Seed storage is particularly important because agricultural demand is seasonal.

Farmers generally require specific varieties at particular points in the sowing cycle. Seed companies and distributors therefore need to maintain inventories for future planting seasons.

That makes warehousing an essential part of agricultural distribution rather than an optional commercial service.

A lower tax burden on that activity could have several effects.

First, it could reduce the cost of holding inventory.

Second, it could reduce the working-capital cost associated with moving seeds through the supply chain.

Third, it could make it easier for distributors to maintain stocks across different agricultural regions.

The direct monetary benefit for an individual farmer may be relatively small in isolation. However, when applied across the seed-distribution network, lower storage costs could contribute to lower landed costs.

Bio-stimulants could get a uniform 5% GST

Another proposal concerns bio-stimulants.

The GST treatment of these products has been inconsistent, with some products being treated at 5% while others have attracted an 18% rate depending on their classification.

The GST Council is reportedly considering a uniform 5% GST rate for all 146 bio-stimulant products registered under the Fertiliser Control Order, or FCO, 1985.

The number of 146 products is significant because it refers to products formally included in Schedule VI of the FCO rather than the much larger universe of products that may have previously been marketed as bio-stimulants.

The agriculture ministry said in September 2025 that 146 bio-stimulant products had been included in Schedule VI of the FCO.

What are bio-stimulants?

Bio-stimulants are agricultural products designed to improve plant physiological processes, nutrient-use efficiency, crop growth or tolerance to environmental stress.

They are different from conventional fertilisers.

A fertiliser primarily supplies nutrients to plants or soil. A bio-stimulant can help a plant use available nutrients more effectively or improve its ability to withstand stress.

Products can include seaweed extracts, humic and fulvic acids, amino acids and protein hydrolysates.

The government formally brought bio-stimulants into the FCO regulatory framework in 2021. The Agriculture Ministry has subsequently worked to move products toward a more formal registration and quality-control system.

Why a single GST rate matters

A uniform 5% rate would address a classification problem that has created uncertainty for manufacturers and distributors.

When similar products fall into different tax categories, businesses face greater compliance costs and the possibility of disputes over classification.

A single rate could make pricing more predictable.

For farmers, the potential benefit is more straightforward: products that are currently taxed at 18% could become significantly cheaper if the entire tax reduction is passed through.

For example, on a pre-tax product priced at ₹1,000, an 18% GST produces a tax component of ₹180, while 5% produces ₹50.

The difference is ₹130 before considering any changes in the manufacturer’s or distributor’s pricing.

That is an illustration of the tax-rate difference, not a forecast of the final retail saving.

Retreaded tractor tyres could move to 5%

The Council is also expected to consider cutting GST on retreaded tractor tyres from 18% to 5%.

This would bring them in line with the 5% GST rate applicable to new tractor tyres following the previous GST restructuring.

The distinction is important for smaller farmers.

A retreaded tyre can provide a lower-cost alternative to purchasing a new tyre, particularly when agricultural equipment is being used intensively.

Applying an 18% tax to the cheaper alternative while new tractor tyres are taxed at 5% can weaken the price advantage of retreading.

A move to 5% would remove that tax difference.

Why tractor tyres matter in farm economics

A tractor is one of the most important capital assets on a mechanised farm.

Its operating cost does not stop at the purchase price.

Farmers have to spend on fuel, maintenance, tyres, hydraulic systems, spare parts and repairs.

Tyres can be particularly expensive because tractors operate across fields, roads and uneven terrain.

Retreading provides a way to extend the usable life of tyres rather than replacing them entirely.

The proposed GST reduction therefore fits into the broader policy objective of lowering the operating cost of agricultural machinery.

It could also encourage more farmers to choose repair and refurbishment over complete replacement.

Psyllium seeds could receive nil GST

The Council may also create a separate GST entry for psyllium seeds, commonly known as isabgol, at a nil rate.

The proposal would reportedly cover the seeds whether they are fresh, chilled, frozen or dried.

The issue is partly one of classification.

Existing GST treatment can differ depending on how psyllium seeds are classified and the condition in which they are supplied.

A separate entry could provide greater certainty.

This matters because isabgol is an important crop for smallholder farmers and India is a major producer and exporter of psyllium-based products.

The need for clarification is also visible in recent tax litigation.

An August 2026 ruling listed by the GST Council’s Authority for Advance Ruling classified certain psyllium seeds supplied through an agricultural market system as taxable at 5%, rather than treating them as exempt fresh seeds.

The proposed separate nil-rate entry could therefore eliminate some of this ambiguity for qualifying psyllium seed supplies.

Coffee-curing services could also get relief

The agriculture package could extend beyond inputs to farm-related services.

The Council is expected to consider a GST exemption for the curing of coffee supplied to farmers.

Coffee curing is a processing activity that prepares harvested coffee for subsequent stages of the supply chain.

The proposed exemption is intended to bring the service more clearly within the broader GST treatment for agricultural activities supplied to cultivators.

For coffee growers, the relevance is that processing is part of the route from harvested crop to marketable commodity.

If the service attracts GST, it can increase the cost incurred before the crop reaches buyers.

Removing that tax could therefore provide some relief to farmers and agricultural intermediaries.

The proposals follow last year’s GST changes

The agriculture proposals are not appearing in isolation.

The 56th GST Council meeting in September 2025 produced a major restructuring of India’s GST rates, including reductions affecting tractors, agricultural machinery, tractor parts, irrigation equipment and other farm-related products.

The government subsequently highlighted lower GST rates on tractors, tractor parts, sprinklers, drip irrigation equipment and harvesting machinery as measures intended to reduce mechanisation costs for farmers.

The current proposals can therefore be viewed as a continuation of that broader effort.

Instead of focusing only on large-ticket equipment, the Council is now examining smaller components and services that form part of the agricultural supply chain.

The bigger issue is tax certainty

The potential benefit is not limited to the headline tax cuts.

Tax certainty can itself have economic value.

A farmer or agricultural business needs to know what tax applies when purchasing an input, storing a product, processing a crop or maintaining machinery.

When classification is unclear, businesses may need to maintain additional compliance processes or face the possibility of future tax disputes.

The proposed standardisation of bio-stimulant taxation and a separate treatment for psyllium seeds could reduce some of these uncertainties.

For agricultural businesses, predictability can make pricing and inventory planning easier.

Will farmers actually see lower costs?

Not automatically.

A GST reduction lowers the tax component of a transaction, but the final consumer benefit depends on how businesses adjust their prices.

If a manufacturer, warehouse operator or distributor retains part of the benefit through higher margins, the reduction may not fully reach the farmer.

The extent of the pass-through will also depend on competition.

Where several suppliers compete aggressively, tax savings are more likely to be reflected in market prices.

Where supply is concentrated or demand is strong, businesses may retain some of the benefit.

Therefore, the GST Council can reduce the tax burden, but it cannot guarantee an equivalent reduction in the final cost of cultivation.

What it could mean for agricultural companies

A lower tax burden could benefit companies operating across several segments.

Bio-stimulant manufacturers could see improved price competitiveness if products currently facing 18% GST move to 5%.

Seed companies and agricultural logistics providers could benefit from lower storage costs.

Tyre manufacturers and retreading businesses could see stronger demand for their products and services if the tax differential narrows.

Coffee processors could see lower costs for services supplied to farmers.

The overall effect would therefore extend beyond farmers to parts of India’s agricultural-input and supply-chain industry.

The fiscal trade-off

Every GST exemption or rate cut has a fiscal cost.

The GST Council must balance lower taxes for specific sectors against the revenue needs of both the Centre and state governments.

Agriculture has a strong policy argument because lower input costs can potentially support farm incomes and reduce cultivation expenses.

However, expanding exemptions too widely can make GST more complicated.

That is why targeted measures may be preferable to broad exemptions.

The proposals currently under consideration appear relatively targeted: they focus on specific seed-storage services, registered bio-stimulants, retreaded tractor tyres, psyllium seeds and coffee curing.

The proposals are part of a broader GST reform agenda

The October 8 meeting is not expected to focus only on agriculture.

The 57th GST Council meeting is also expected to consider reforms involving registration, returns, refunds, disputes and input-tax-credit mechanisms.

Other proposals reportedly include changes to GST prosecution and arrest provisions and measures intended to improve compliance for businesses.

The government has described the broader agenda as an effort to reduce the time and cost of GST compliance.

That makes the agriculture proposals part of a wider attempt to move India’s GST system from rate rationalisation toward administrative simplification.

What happens next?

The immediate next step is the GST Council meeting on October 8.

The Council is chaired by the Union finance minister and includes finance ministers or representatives from the states and Union territories.

The reported agriculture measures are still proposals.

If approved, the relevant recommendations would subsequently need to be implemented through the appropriate notifications and legal changes before they become operational.

Therefore, farmers and businesses should not treat the reported rates as effective until the government formally notifies the changes.

Frequently asked questions

Will GST on seed storage become zero?

The GST Council is expected to consider exempting storage and warehousing services for seeds meant for sowing. The proposal would reportedly ensure that grading, treatment and packing do not automatically prevent eligible seeds from receiving the warehousing exemption.

What GST rate is proposed for bio-stimulants?

A uniform 5% GST rate is reportedly being considered for the 146 bio-stimulant products registered under Schedule VI of the Fertiliser Control Order, 1985.

Could tractor tyre GST fall from 18% to 5%?

Yes. The Council is expected to consider reducing GST on retreaded tractor tyres from 18% to 5%, bringing them in line with new tractor tyres.

Will psyllium seeds become GST-free?

The Council may create a separate nil-rate GST entry for psyllium, or isabgol, seeds covering fresh, chilled, frozen and dried forms. This is still a proposal and has not yet become a final tax rule.

The Bigger Picture

The proposed agriculture-focused GST changes are significant because they target costs that sit between the farm gate and the final input. Seed storage, tractor tyres, bio-stimulants and crop-processing services may individually represent relatively small expenses, but together they form part of the operating cost of Indian agriculture.

The proposals also show how India’s GST policy is evolving. The initial focus was on creating a unified indirect-tax system, followed by rate rationalisation. The next stage increasingly involves correcting classification problems, removing anomalies and ensuring that the tax structure does not unintentionally penalise particular agricultural activities.

For farmers, the real test will be pass-through. A lower GST rate matters most when it translates into lower purchase, storage or processing costs. For businesses, the bigger benefit may be certainty: a uniform 5% rate for eligible bio-stimulants and clearer treatment for seeds and agricultural services could reduce disputes and compliance costs.

Looking Ahead

The October 8 GST Council meeting will determine whether these proposals move forward and in what form. The final recommendations could differ from the measures currently being reported, so the agriculture sector will be watching the Council’s decisions closely. Any approved changes would then need formal notification before taking effect.

If implemented, the measures could provide incremental relief across several stages of the farm economy rather than delivering one large tax cut. The combination of cheaper agricultural inputs, lower equipment-maintenance costs and clearer tax treatment could support the government’s broader objective of reducing cultivation costs while making India’s GST framework more predictable for agricultural businesses.