The Institute of Chartered Accountants of India (ICAI) has released its comprehensive publication titled “Handbook on Applicability of GST on Agricultural Sector (January 2026)”, aimed at providing clear, structured, and practical guidance on how Goods and Services Tax (GST) applies to India’s agricultural and allied sectors.
A Sector of National Importance
As highlighted in the Introduction of the Handbook, agriculture supports 42.3% of India’s population and contributes 18.2% to GDP (Economic Survey 2023–24), making clarity in taxation critical for farmers, agri-businesses and policymakers.
Key Highlights of the Publication
Comprehensive Coverage of GST Provisions for Agriculture
The Handbook explains GST implications on:
- Registration requirements for agriculturists and agri-businesses
- Classification of agricultural goods and services under HSN/SAC codes
- Taxability, exemptions, and reverse charge mechanism
- Input Tax Credit (ITC), refunds, and documentation
The publication consolidates statutory provisions, circulars, notifications, and judicial references up to 31 December 2025 (Preface).
Special Focus on Agriculturists and Exemptions
As detailed in Chapter 3:
- Agriculturists supplying produce from cultivation of land are exempt from GST registration.
- Circular No. 247/04/2025 clarifies that agriculturists selling dried pepper or raisins from their plantations are not liable for registration.
- Leasing of agricultural land remains GST-exempt only when actually used for agricultural purposes.
Change in land use for commercial activities attracts 18% GST.
- Detailed Analysis of “Agricultural Produce”
The book provides clarity on the key criteria:
- Produced from cultivation or animal rearing
- Processing, if any, must be minimal and customary
- Such processing must not alter the essential characteristics.
Examples explained include:
- Green tea leaves = agricultural produce
- Tea (black/green/white) = processed, not agricultural produce
- Jaggery = not agricultural produce
Clear Guidance on Classification of Goods & Services
Chapter 4 offers practical classification guidance, with HSN/SAC coverage for:
- Agricultural produce (Chapters 1–14)
- Fertilizers, pesticides, and agrochemicals (Chapters 28–31)
- Tractors, harvesters, irrigation equipment (Chapters 84, 85, 87)
- Support agricultural services (SAC 9986)
The table on pages 39–41 enumerates taxable goods under Schedules (5%, 18%).
Taxability Matrix for Common Agricultural Transactions
The Handbook provides simplified transactional analysis such as:
- Sale of grains/fruits/vegetables → Supply of goods
- Free distribution of seeds → Not a supply
- Provision of farm labour (individual) → Not a supply (Schedule III)
- Renting agricultural machinery → Supply of services
- Sale of agricultural land → Not a supply.
Strong Emphasis on Support Services to Agriculture
Services such as:
- Cultivation-related activities
- Farm labour supply
- Sorting, grading, primary-level processing
- Storage and warehousing of agricultural produce are exempt under SAC 9986 when essential characteristics are not altered.
Message from ICAI Leadership
In his Foreword, ICAI President emphasises that GST, as India’s most transformative tax reform, demands consistent knowledge enhancement. He notes that the Handbook will serve as a dependable resource for practitioners and policymakers navigating GST complexities in agriculture.
The Handbook can be accessed at: can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/03/Handbook-on-Applicability-of-GST-on-Agricultural.pdf
