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March 21, 2023

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GST on Agricultural Equipment: Rates, Rules and HSN

Agricultural equipment helps to alleviate the need for manual labor, enhance productivity, and facilitate various agricultural activities. The classification of the equipment is important, as the rate of tax will be affected by the precise description and HSN classification of the equipment. The exact classification of the equipment and HSN classification is very crucial, as the applicable tax rate depends on this.

The GST regime on agricultural machinery has also evolved over the years. After the 56th GST Council meeting, a few categories of agricultural equipment have been introduced with new rates. Rather than relying on the old rates on the GST chart or an invoice, companies should be using the correct rate.

What is the Goods & Services Tax on agricultural equipment?

The Goods and Services Tax on agricultural equipment applies to equipment for agriculture and allied activities.

An overview of the various important categories

Agricultural Equipment	HSN Code	Current GST Rate
Tractors, except specified road tractors	8701	5%
Soil preparation and cultivation machinery	8432	5%
Harvesting and threshing machinery	8433	5%
Agricultural, horticultural, forestry and poultry machinery	8436	5%
Drip irrigation systems	8424	5%
Agricultural sprayers	8424	5%
Nozzles for drip irrigation	8424	5%
Composting machines	8479	5%
Agricultural-purpose self-loading	8716	5%

Also Read: HSN Code & GST on Agricultural Equipment
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HSN Codes are used to identify agricultural equipment

HSN	Broad Description
8424	Sprinklers, drip irrigation systems and mechanical sprayers
8432	Soil preparation and cultivation machinery
8433	Harvesting and threshing machinery
8436	Other agricultural, forestry, poultry and bee-keeping machinery
8479	Composting machines
8701	Tractors
8716	Certain agricultural trailers

The tractor GST Rate is set at 28%.

Confirm tractors to be used.
Confirm HSN 8701 applicability.
See the current rate of GST.
Confirm the customer's GSTIN.
Correctly record taxable value.
Select the proper CGST/SGST or IGST.
Keep invoice and transport records.

GST rate for Harvesting and Threshing Equipment

Harvest and threshing machinery, in general, is classified under HSN 8433. The headings include harvesting or threshing machinery, straw or fodder balers, grass or hay mowers, and parts specifically attached to them.

GST rate for Irrigation Equipment.

A major category of agricultural business equipment is irrigation equipment. Mechanical sprayers, certain nozzles, specified sprinklers, and drip irrigation systems, such as laterals, are included in HSN 8424.

GST on Other Agricultural Machinery Under HSN 8436

HSN 8436 is intended for agricultural, horticultural, forestry, poultry keeping, and beekeeping machinery. It may contain machinery used for preparing animal feed, poultry equipment, germinating plants, incubators, brooders, and other machinery as described in the heading.

A guide to understanding how to determine the correct HSN Code.

Specify the exact product.
Check its technical details.
Determine its primary function.
Review the appropriate HSN chapter.
Check the detailed description of the tariff.
Review the latest notification of the GST rate.
Check the appropriate subheading.
Create an updated product master.
Be consistent in using classification in invoices and returns.

GST invoice for agricultural equipment.

Correct product description
Correct HSN code
Correct unit and quantity
Correct taxable value
Applicable GST rate
Correct CGST/SGST/IGST
Supplier GSTIN
Enter the customer GSTIN
Invoice number and date
Provide transport information

Effect of changes in GST rates for agricultural equipment business on goods and services tax

Lowering the GST rates on some categories of agricultural equipment from 12% to 5% may impact the prices, invoicing, inventory valuation, and accounting systems. Businesses with stock levels over the rate-change date will need to check their pre- and post-rate-change invoices closely for the right rate applied as per the notifying rules and supplies to be made before the rate change date.

Business Areas to be updated.

Area	Required Review
Product master	Update HSN and GST rate
Billing software	Update tax settings
Invoice templates	Verify tax calculations
Inventory records	Review rate-change impact
Accounting system	Update tax ledgers
GST returns	Verify reported rates
Price lists	Review customer pricing
Staff training	Explain revised classifications

Also Read: Other Agricultural Machinery GST Rates

Conclusion

GST on agricultural equipment relies on the proper classification of the equipment under the appropriate HSN heading and the appropriate GST rate for the particular category of agricultural equipment. The rate of GST for some important classes of agricultural equipment has been reduced from 12 per cent to five per cent, such as tractors, soil-preparation equipment, harvesting equipment, specific irrigation equipment, and other agricultural machinery.

HSN classification and compliance with GST are crucial to correct billing and compliance for manufacturers, distributors, dealers, and retailers. GST notifications mean that businesses should keep their product masters up to date, check current rates, have accurate invoices, and review classification when notifications are made.

FAQs

1. What is the farm equipment goods and services tax rate?

The farm equipment goods and services tax rate is 5% goods and services tax rate, The precise product description and HSN categorization determine the applicable pricing.

2. What is the HSN Code of agricultural machinery?

The HSN code of agricultural machinery is 8432 to 8436.

3. What is the rate of goods and services tax applied to tractors?

Tractors are subject to the 5% goods and services tax rate. Except for the road tractors listed in the pertinent entry, specified tractors under HSN 8701.

4. How much is irrigation equipment subject to GST?

A few nozzles under HSN 8424 at 5% are included in the updated agricultural-sector entry. Before sending an invoice, the precise product classification should be verified.

5. Are all agricultural products subject to 5% GST?

No, not all products used by farmers are eligible for a 5% GST rate. The product's classification, description, and appropriate GST notice determine the applicable rate.

6. How to ensure the proper HSN and GST rate?

Businesses should check the technical features of the business's HSN code and then check the applicable rate in the latest official notification of the GST rate.

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