GST rates : Zero duty on primary produce to hit states' revenue

The Commission for Agricultural Costs and Prices welcomed zero duty on agri-produce, but doesn't know how the state is going to recoup the revenue loss.

The state governments' coffers will be hit badly with zero duty for all primary produce from foodgrains, oilseeds, fruits & vegetables, sugarcane/gur, milk and spices, to fish and meat under the Goods and Services Tax, according to reports.

The agrarian states which levy Value Added Tax and other levies, excluding fee payable to commission agents, on wheat, paddy will be losing revenue in thousands of crores with the roll out of GST.

For example, farmers pay 12 per cent levy on the basic grain purchase price (excluding the commission fee to agents) imposed by Punjab government. Both paddy and wheat would have generated revenue of over Rs 5,300 crore for the state government.

However, Punjab is not the only state to lose revenue. The total state levy on agricultural produce in Haryana and Madhya Pradesh work out to 11.5 per cent and 9.2 per cent respectively.

Now, the question is how the state is going to recoup the revenue loss from the GST rate being made zero for most agri-produce.

According to one estimation by The Commission for Agricultural Costs and Prices, these levies on paddy and wheat to have realized almost Rs 10,000 crore in 2015-16 for Punjab, Haryana, MP, AP, Chhattisgarh and Odisha alone. Though the commission welcomes zero duty on farm produce, but it questioned how are the states going to recoup the revenue loss from the GST rate being made zero for most agri-produce. The commission also said it had no clue what would happen after five years when the Centre stops paying compensation for the revenue loss as told in GST council meetings.

The GST will be rolled out in July 2017.

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