Draft model GST Bill alters definition of 'agriculturists'

Say it must be made clear how exemption and taxation will work in case of incorporates and whether 'sharecroppers' were included too

The passage of Constitution Amendment Bill on the Goods and Services Tax (GST) in the Rajya Sabha on Thursday has once again rekindled the debate on definition of ‘agriculturists’ as defined under the draft model GST law that was put in the public domain in June.

Though, the model law is just an indicative piece of legislation and a final law will be framed by the yet-to-be-conceived, all-powerful GST council, experts feel if the model law is adopted in toto, then a lot of clarity on what is a definition of ‘agriculturists’ will needs to put in place.

At present, in the model law, exemption granted to an ‘agriculturist’ from taxable person under GST and ‘agriculturists’ is defined as one who cultivates land personally for the purpose of agriculture.

 

Cultivating land personally means to carry on agriculture operation on one’s account, or by one’s own labour or by labour of one’s family or by servants on wages payable in cash or kind (but not in crop share) or by hired labour.

This definition does not include incorporate farms, which does give an impression that such farms are not exempted as taxable person.

“Yes, the draft model GST law does seem to redefine ‘agriculturists’,” said noted tax expert and partner in EY, Satya Poddar. He said the model law gives exemptions of two kinds.

The first is exemption to certain category of taxable persons and second is exemptions to certain kinds of products he sells. In the case of ‘agriculturists’, while the model law is clear on the second set of exemptions, it is rather open-ended on the first set.

Chairman of Bharat Krishak Samaj (Farmer’s Forum India), Ajay Vir Jhakhar too said a lot of clarity on the definitions under model GST law is needed. There have also been questions as to whether the model law has suggested that ‘sharecroppers’ be included into the definition of taxable person. Jakhar in a series of tweets a few days back sought clarity on all the above mentioned points.

This would mark a major change in taxation policy, if the draft is adopted as final law. The question is whether mandi tax would fall under the purview of state levies that are subsumed into GST would also need to answered in the next few months.

However, if all kinds of farm products are kept out of purview of GST then it remains to be seen how just changing the definition of taxable person marks a big difference.

Of course, all these could remain as just textbook debate if the proposed Council takes an altogether different look at the issue.