The Goods and Services Tax (GST) Council has recently announced new reforms that are going to benefit millions of farmers across India. The 56th GST Council meeting chaired by the Finance Ministry has brought a series of changes in GST rates, cutting down the tax burden on essential agricultural goods and machinery. This is being seen as a Diwali gift for farmers as tractors, composting machines, irrigation systems, bio-pesticides, and other farming equipment will now attract much lower GST compared to earlier years.
These GST rate changes will come into effect from 22 September 2025, and they are expected to reduce the cost of farming for small and big farmers alike. In this article, we will explain in detail what GST reforms have been made, which agricultural goods will become cheaper, and how this move impacts the farming sector.
Also, we will link these reforms with other GST changes announced recently, such as GST rate changes making products cheaper or costlier and overall GST reforms shaping India’s economy.
Why GST Rate Cut Matters for Farmers
Agriculture is the backbone of the Indian economy, and farmers often face high input costs due to machinery, fertilizers, irrigation systems, and pesticides. By reducing GST rates, the government aims to:
- Lower farming expenses.
- Improve access to modern agricultural tools.
- Support farmers in adopting sustainable practices.
- Boost agricultural productivity in rural India.
Earlier, GST rates on tractors, irrigation machinery, and fertilizers were significantly higher (12%–18%), which often made it difficult for small-scale farmers to purchase them. With the latest reform, most of these goods now fall under the 5% GST slab, ensuring direct cost savings.
Overview of New GST Slabs
The new GST structure has simplified taxation by removing some slabs and introducing a higher rate for luxury items. The major highlights include:
- 12% and 28% slabs have been removed.
- 5% and 18% slabs continue.
- A new 40% GST slab introduced for luxury products and items that are not essential.
- Focus on reducing tax on agricultural equipment and farmer-related goods.
For more detailed insights on these slabs, you can check the complete guide to GST 2.0 changes.
GST Rate Cut on Tractors
Tractors are one of the most important assets for farmers. Earlier, farmers had to pay 12% GST on tractors and 18% GST on tractor tyres.
- Now, tractor GST has been reduced to 5%.
- Tractor tyres will also attract only 5% GST.
This single move will make tractors significantly more affordable, allowing more farmers to own tractors rather than depending on rental services. This is particularly helpful for small farmers who rely on shared farming equipment.
GST Cut on Composting Machines and Agricultural Machinery
Modern farming requires composting and other machines to ensure soil fertility and better productivity. Earlier, composting machines, harvesting equipment, forestry machinery, and horticulture tools had a 12% GST.
Now, the revised rate is 5% GST. This includes:
- Composting machines (used for organic manure production).
- Harvesting and threshing machines.
- Horticulture and forestry machines.
This reduction supports farmers in moving toward organic and eco-friendly farming. The cost of adopting such machinery will now be lower, encouraging sustainable practices.
Bio-Pesticides and Natural Farming Products
Chemical fertilizers and pesticides are not only costly but also harmful in the long run. Many farmers have shifted to bio-pesticides and organic solutions. The GST Council has reduced GST on:
- 12 specified bio-pesticides.
- Natural menthol.
Earlier taxed at 12%, these will now be available at 5% GST, making organic farming inputs cheaper. This move is a strong push towards natural and sustainable agriculture.
Irrigation Systems and Water-Saving Machinery
Water scarcity is a big issue in Indian agriculture. Farmers often use drip irrigation and sprinkler systems to save water. Earlier, these machines were taxed at 12% GST, but now the rate is cut to 5%.
The items include:
- Drip irrigation systems.
- Sprinklers.
- General irrigation machines.
This GST cut will encourage more farmers to install water-efficient irrigation systems, ensuring both cost savings and water conservation.
Other Agricultural Inputs with Reduced GST
Apart from tractors and irrigation systems, several other items now fall under the 5% GST slab:
- Micro-nutrients for soil.
- Agricultural machinery and spare parts.
- Compost-based solutions.
Farmers will now be able to buy these inputs at cheaper rates, reducing their overall production costs and improving their profit margins.
When Will the New Rates Apply?
The GST Council has clarified that these new rates will be applicable from 22 September 2025. This means farmers can plan their purchases accordingly to benefit from the reduced tax.
How Farmers Will Benefit from GST Rate Cut
The benefits of these changes are both direct and long-term:
- Lower Input Costs – Immediate savings on tractors, irrigation systems, and bio-pesticides.
- Increased Farm Mechanization – More farmers can afford modern machines.
- Support for Organic Farming – Reduced GST on compost and bio-pesticides will encourage natural farming methods.
- Water Conservation – Affordable drip and sprinkler systems will save water resources.
- Higher Profits – By spending less on inputs, farmers can increase their net income.
GST Reforms in Wider Economic Context
The GST changes for farmers are part of the larger GST reform India is undergoing. The government is trying to simplify the tax structure, boost domestic productivity, and support both industry and agriculture.
Just like the relief for farmers, other sectors are also seeing price changes. For example, luxury goods are now placed under the 40% GST slab, while essential goods are kept in lower slabs. These reforms also help balance the impact of international trade challenges, including the effect of US tariffs on Indian exports. You can read more about it in this detailed analysis: GST reforms and their impact on India vs US tariffs.
Challenges Ahead
While GST rate cuts are a welcome move, a few challenges remain:
- Farmers in remote villages may still face difficulties accessing machines.
- Awareness about the new rates is limited, and many may continue paying higher prices unless they are informed.
- Implementation at local dealer and distributor levels needs to be monitored.
Final Thoughts
The GST rate cut for farmers in 2025 is a big step toward empowering Indian agriculture. By reducing GST on tractors, irrigation systems, composting machines, and bio-pesticides, the government has shown its intent to lower the cost of farming and encourage sustainable practices.
As these new rates become effective from 22 September 2025, farmers across India are expected to benefit directly, making farming more affordable and profitable. This reform is not just about tax reduction, but about supporting the backbone of India’s economy – the farmers.
By connecting these changes with the overall GST reform journey, it is clear that India is moving toward a simpler, farmer-friendly, and growth-oriented tax system.
