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LoansJagat Team

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01 Jul 2025

GST on fertilizer– Rates, Input Tax Credit & Impact on Farmers

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For Example, Ramaya is a small farmer from the Gundoor district of Andhra Pradesh. He purchases urea for his agricultural cultivation of various crops. He buys 50 kilograms (KG) of urea fertiliser for ₹ 268. As he lacks literacy, he wonders about the inclusive amount of 5% GST for the urea fertiliser.

 

The wholesaler of that agro shop enlightened him that the 5% GST is inclusive of the MRP of ₹ 268. Ramaya. Still, Ramaya wonders what GST has to do with fertilisers!

 

Well, this blog enlightens everyone who still wonders like Ramaya.

 

GST on Fertilisers

 

Fertilisers are essential for agricultural cultivation. It helps the farmers to enhance the growth of a crop by providing rich nutrients such as nitrogen, phosphorus and potassium. Due to this, the fertilisers are popular all over India.

 

As the demand for fertilisers increases, the Government of India has designated a certain percentage of GST on fertilisers to optimise the taxation. Let’s see how the wholesaler explains the 5% GST on fertilisers to Ramaya:

 

Example:

 

You see, the hypothetical costs for the production of 45 kg of urea can cost around ₹ 1,200 at least. Apart from this transport cost, commission and other charges can go up to at least ₹ 100. Therefore, the total cost of a 45 kg urea would be ₹ 1,300

Read More Goods Exempted from GST

 

Now adding 5% GST to the amount of ₹ 1,300 is ₹ 65, and the total amount is ₹ 1,365. However, the role of government subsidy is also highly phenomenal. Because the selling price to the farmer is ₹ 268, whereas the remaining amount of ₹ 1,097 is the government’s subsidy.

 

Let’s look at the table below:

Production Cost of 45 kg of urea

₹ 1,200

Transportation and miscellaneous costs

₹ 100

Total

₹ 1,300 (₹1,200 + ₹100)

GST 5%

₹ 65

Total Amount of 45 kg of urea

₹ 1,365

Selling Price to Farmers

₹ 268

Government Subsidy

₹ 1,097

 

Therefore, ₹ 268 is the MRP paid by the farmers.

 

Current GST Rate on Fertilisers

 

All the current rates on fertilisers are navigated with the Harmonised System of Nomenclature (HSN). This code helps the GST compliance team ensure the right GST rates for the respective fertilisers. 

HSN Code

Description

GST Percentage (%)

3101

All the animal, vegetable, and/or organic fertilisers that are packed in the unit containers and bear a brand’s name.

All type of organic manures, which bears a brand’s name.

5%

3102

This code encompasses the mineral of chemical fertilisers, nitrogenous, and other mineral fertilisers.

5%

3103

This HSN includes chemical fertilisers, minerals, and/or phosphate fertilisers.

5%

3104

It includes chemical fertilisers, potassium, and minerals

5%

3105

The chemical or mineral fertilisers which contain two or three of the fertilising elements, such as nitrogen, phosphorus, and potassium.  

5%

 

Example:

 

If a farmer buys the urea worth ₹ 268 for two bags, he will pay ₹ 536 (₹ 268 * 2), which is inclusive of GST.

The wholesale retailer of the urea should enter the HSN code 3101 in the invoice, and should submit the same in the GST portal for ITC.

 

How do the Calculations work?

 

Scenario 1:

 

Let’s take an example of Ramu Agro sells 25 bags of urea, worth ₹ 1,300 each, to the distributor Kumar Enterprises. Then this is how the calculations work:

Per bag  

₹ 1,300

Units

25 bags

GST

₹ 65 (5 %)

MRP

₹ 1,365

Total Cost  

₹ 34,125

 

Here, the wholesale-retailer needs to furnish HSN code, MRP, and GST in the invoice, so that he can claim the ITC from the GST portal. In the GST. The invoice, which ought to be submitted in the GTS portal, must mention B2B sales for ITC.

 

Scenario 2:

 

Suppose if the same Ramu Agro sells 10 bags of urea to farmers, worth ₹ 268 each, then this is how the calculations work:

Per bag  

₹ 1,300

Units

10 bags

GST

₹ 65 (5 %)

MRP

₹ 1,365

Cost Paid by Farmer for 10 bags

₹ 13,650

 

In this scenario, the wholesale-retailer must mention B2C in the invoice for the claim of ITC.

 

Note: Those who need to claim the ITC must have a valid GSTIN number and should furnish the details of total outward sales regularly in the GST portal.

 

Key Takeaways

 

The following features need to be learned, both by the farmers and the sellers of fertilisers. This helps in the process of ITC.

 

Input Tax Claim: The registered retailer of agro products can claim the ITC through the GST filing portal by providing the GST amount of the sale.

 

GST Registration: Only the retailer needs to register their enterprise if their annual income exceeds the threshold of the respective categories. Farmers are not entitled to pay GST.

Also Read - GST on Tractor

 

Invoice Preparation: The GST registered seller must prepare an invoice, which should incorporate the total sales, their amount, and along with the GST rates. Though the farmer is not GST registered, the retailer still needs to provide the invoice copy.

 

Example:

 

The sale of 25 bags of urea by Ramu Agro to Kumar enterprises must have the following details:

GSTIN of Ramu Agro

00XXXXX7777Y1Z6

GSTIN of Kumar Enterprises

99XXXXX6666T2Z8

Date

12.05.2025

Invoice Number

RA/011/2025-05

Per bag  

₹ 1,300

Units

25 bags

GST

₹ 65 (5 %)

MRP

₹ 1,365

Total Cost  

₹ 34,125

 

Conclusion

 

Today, the GST has become an undeniable phenomenon in the realm of taxation. Therefore, all the retailers must have a proper GSTIN and should furnish their total sales, with the invoice details for claiming ITC. The HSN codes must match the total sales of fertilisers to avoid mismatching and rejection of ITC.

 

FAQS

 

1. What will happen if the wrong HSC code is entered for fertilisers?

Any wrong or mismatched HSN codes of fertilisers can lead to incorrect GST filing and complicate ITC claims.

 

2. Does the government take accountability for the subsidy price?

Yes, the government takes accountability for the subsidy price, and enables the farmers to pay only lesser amount, which is inclusive of GST.

 

3. Is it mandatory to have a GSTIN for retailers?

All the retailers whose annual turnover exceeds the respective threshold need to register for a valid GSTIN.

 

4. Why has the government designated specific HSN codes for fertilisers?

Because it will help the government to track the total sales, along with its GST, in the time of examining the ITC.

 

5. In which portal, the GST filings need to be furnished for ITC?

The registered retailers need to furnish the GST filing in the portals of GSTR-1 and GSTR-3B regularly.

 

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?

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