GST on Copper Sulphate: Why Arecanut Cooperatives Want a 5% Rate
Ahead of the next GST Council meeting, arecanut cooperatives have urged the government to reduce GST on copper sulphate to 5%. Used extensively in plant protection and fungal control in arecanut plantations, the current 18% GST rate has become a cost burden for farmers and cooperatives alike.
But does their demand hold water legally and economically?
What Is Copper Sulphate and Why It Matters for Arecanut Farming
- Copper sulphate (CuSO₄) is widely used in agriculture as a fungicide and bactericide.
- In the arecanut sector, it is crucial for controlling fruit rot, especially during the monsoon.
- Farmers, particularly in Karnataka and Kerala, depend on this chemical for crop protection.
- Currently taxed at 18% under HSN 2833, it is not classified under agricultural inputs eligible for concessional GST.
The Demand: Cut GST Rate from 18% to 5%
Arecanut cooperatives argue:
- Agricultural input: Copper sulphate should be treated on par with fertilizers and pesticides that attract 5%.
- Input cost burden: The 18% GST rate raises the cost of cultivation by over ₹2,000 per hectare.
- No ITC benefit: Many cooperatives operate under exemption thresholds or special category, making input tax credit (ITC) ineffective.
- Farmer welfare: Lower GST directly benefits farmers who are the end users.
Legal Framework: GST Classification of Agricultural Inputs
Here’s how similar items are currently treated under GST:
| Product Type | HSN Code | GST Rate | Classification Notes |
|---|---|---|---|
| Urea, Fertilizers | 3102–3105 | 5% | Essential agri inputs with concessional rate |
| Pesticides, Fungicides | 3808 | 18% | Standard rate unless specified as bio-agri inputs |
| Copper Sulphate | 2833 | 18% | Classified as chemical, not as agri-input |
CBIC Clarification: No specific exemption or concessional entry has been notified for copper sulphate till date under Not. No. 1/2017–CT (Rate), or its successive amendments.
Expert View: How GST Policy Can Be Calibrated for Farm Inputs
According to tax experts:
- A blanket rate for all agri inputs isn’t feasible, but selective reliefs are allowed where a product has direct farm-end use.
- Copper sulphate may qualify for rate reduction if supported by data on farm usage and economic impact.
- States can raise the issue through the fitment committee, which reviews classification and rate proposals before the Council vote.
What Happens Next?
The matter will be taken up in the upcoming 53rd GST Council Meeting. If the fitment committee recommends, the GST rate can be cut to 5% by:
- Amending the GST Rate Notification under HSN 2833
- Including copper sulphate in the agri-input category
- Ensuring clarity via CBIC circular to avoid litigation or classification disputes
Practical Tip for Businesses & Co-operatives
Until the rate is officially reduced:
- Cooperatives may claim ITC on copper sulphate if registered and supplying taxable agri-products.
- If operating under exemption threshold, they must factor in GST as part of cost price and seek local support or subsidies.
Summary
Arecanut cooperatives want GST on copper sulphate reduced from 18% to 5%. Used as a fungicide in arecanut farming, it’s currently taxed like a chemical, not an agri input. Here’s why this demand could find support in the next GST Council meet.
FAQs
Q1. What is the current GST rate on copper sulphate?
Copper sulphate attracts 18% GST under HSN 2833.
Q2. Is copper sulphate classified as an agricultural input?
Not officially. It’s treated as a chemical unless notified under agri-use.
Q3. Can cooperatives claim input tax credit?
Yes, if they are GST-registered and make taxable supplies. Otherwise, GST becomes a cost.
Q4. Will the GST rate be reduced to 5%?
It’s under consideration. Final decision rests with the GST Council based on fitment committee recommendations.
Final Word
If the GST Council agrees, this could be a landmark decision benefiting not just arecanut growers, but other crop sectors using copper sulphate. We at Efiletax will keep tracking the updates and help you adapt to rate changes and input credit planning.