India Slashes GST on Tractors and Agri-Inputs to Boost Farm Economy
03 September 2025, New Delhi: The Central Board of Indirect Taxes & Customs (CBIC), under the Government of India, has announced a significant reduction in Goods and Services Tax (GST) rates for a wide range of items related to farming and agriculture. The move is aimed at easing the financial burden on farmers, boosting rural development, and making essential agricultural equipment more affordable.
According to the revised structure, the GST on tractor tyres and parts has been reduced from 18% to 5%, while the GST on tractors themselves has been brought down from 12% to 5%. The announcement also covers farm inputs such as specific bio-pesticides and micronutrients, which will now attract 5% GST instead of 12%.
In addition, drip irrigation systems and sprinklers, which are critical for water conservation and modern farming practices, will now fall under the 5% GST bracket, down from 12%. The government has also slashed GST on all machines used for soil preparation, cultivation, harvesting, and threshing, from 12% to 5%.
Comparison of Old and New GST Rates in Agriculture
| Item | Old GST Rate | New GST Rate |
|---|---|---|
| Tractor tyres and parts | 18% | 5% |
| Tractors | 12% | 5% |
| Specific bio-pesticides and micronutrients | 12% | 5% |
| Drip irrigation systems and sprinklers | 12% | 5% |
| Machines for soil preparation, cultivation, harvesting, and threshing | 12% | 5% |
These changes are expected to lower costs for farmers, promote mechanisation, and encourage the adoption of modern agricultural technologies.
Prime Minister Narendra Modi, in a statement following the announcement, described the reform as a “next-generation GST initiative” and said it comes as a gift to citizens ahead of Diwali.
“The next generation of GST reforms are a gift for every Indian this Diwali. Taxes for the general public will be reduced substantially. MSMEs and small entrepreneurs will get huge benefit. Everyday items will become cheaper, and this will also give a new boost to the economy,” the Prime Minister said.
The reform is expected to have a direct impact on millions of farmers across India, particularly small and marginal farmers who rely on affordable equipment and inputs to sustain their livelihoods. The changes in GST rates will be implemented with effect from 22nd September 2025. The reduction in tax rates is also likely to make agricultural machinery companies more competitive while supporting the government’s vision of doubling farmers’ income and driving rural economic growth.
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