The Isabgol (Psyllium) processing industry has received an assurance of a resolution from the Gujarat Finance Minister after a critical GST interpretation dispute brought trading to a standstill across key hub centers.
Facing severe operational disruption, representatives of the Isabgol Processors Association (IPA) directly approached the Ministry of Finance, the GST Council, CBIC, and the Tax Research Unit (TRU) seeking an immediate, uniform nationwide clarification on the tax structure governing naturally harvested seeds.
The deadlock turns on a single technicality: whether raw psyllium seeds purchased straight from farmers should attract zero tax as fresh agricultural produce or a 5% levy as dried goods.
At a media interaction in Ahmedabad on Tuesday, Ashvin Nayak, President of the IPA, said, “The government should speak to the affected parties and find a solution. He highlighted the difficulties faced by farmers and MSMEs because of the GST uncertainty.”
The 0%/5% Confusion
The immediate dispute is over whether Isabgol seeds bought directly from farmers in their natural condition should be treated as fresh seeds with 0% GST or as dried seeds attracting 5% GST. A CBIC FAQ states that fresh Isabgol seeds are exempt, while dried or frozen seeds attract 5% GST.
Gujarat and Rajasthan authorities have taken different positions:
| Issue / Authority | Current Situation / Ruling | GST Status |
| Gujarat Ruling | Raw Isabgol seeds bought directly from farmers through APMC auctions, without intentional drying or processing, are treated as fresh Isabgol. | Exempt (0%) |
| Rajasthan Ruling | Rajasthan AAR held that Isabgol seeds supplied to processing units attract GST because the seeds become dry during storage, even without intentional drying. | 5% GST |
| Industry Demand (IPA) | Isabgol Processors Association wants one clear and uniform GST interpretation applicable across India | National Clarification Sought |
The industry said the conflicting rulings have disrupted the movement of fresh Isabgol seeds across Gujarat, Rajasthan and Madhya Pradesh. Traders are hesitant to issue bills because of fears of future tax demands, interest and penalties.
Farmers and MSMEs Under Pressure
The uncertainty is affecting farmers who are finding it difficult to sell their produce. Processing units are facing uncertainty over raw material supplies, while the industry said the situation is creating liquidity problems for MSMEs.
The industry says the dispute is causing:
- Difficulty for farmers in selling their produce.
- Liquidity pressure on MSMEs and export-oriented units.
- Uncertainty for traders over future tax liabilities.
IPA had asked the GST Council, Finance Ministry, CBIC and TRU to clarify that Isabgol seeds purchased from farmers in their natural condition and supplied without intentional or machine-based drying should be treated as fresh and kept outside GST.
₹5,000-Crore Unjha Trade Hit
The dispute has had its biggest impact on Unjha in north Gujarat, one of the country’s major Isabgol trading and processing centres. The trade through Unjha is estimated at around ₹5,000 crore a year. Nearly 1.9 lakh metric tonnes of psyllium stock was processed there in FY 2025-26.
Around 1.6 lakh metric tonnes of raw material came from Rajasthan, while Gujarat supplied about 15,400 metric tonnes and the remaining quantity came from Madhya Pradesh. The market supports around 65 specialised processing units involved in cleaning, husking and grading Isabgol for domestic and international markets.
Export Industry Also Affected
Isabgol seeds are mainly used as raw material for making Isabgol husk. According to the IPA, around 90% of finished Isabgol husk is exported, while about 10% is sold in the domestic market with 5% GST. The association said the industry is largely export-oriented and that GST on naturally obtained fresh seeds could block working capital through input tax credit.
The disruption has also affected the supply chain. Raw material arrivals from Rajasthan have stopped, leaving processing units with low utilisation and increasing their fixed costs, while exporters face difficulties in meeting overseas shipment schedules.
Why Isabgol Trade Matters
The timing of the dispute is also important for farmers. Unjha’s APMC auctions help farmers sell their produce and arrange money for seeds, fertilisers and other requirements for the next crop cycle. With trading disrupted, farmers are facing liquidity pressure during the sowing season.
The IPA said that a clear national GST clarification would restore confidence among traders, protect farmers, bring uniformity to GST compliance and help production and exports continue without disruption. The association has also argued that exempting naturally obtained fresh Isabgol seeds would not cause revenue loss because finished Isabgol husk sold in the domestic market already attracts 5% GST.
