Bad News For Farmers: GST to Increase Cost of Tractor Production

Tractor industry has always been a hot topic when it comes to agriculture. As per the recent reports, growth rate of around 6-7% is expected in 2018; quite less than the expected (8-9%). However, forecast also revealed, the market share of newer brands may vary but the established giants like Mahindra & Mahindra will continue to remain intact. Currently, when the whole world is talking about GST (Goods & Service Tax), tractor industry hasn’t remained untouched. As per the recent announcements by the Government of India, new provisions for the industry will come into the effect from 1st July, 2017. Unfortunately, it’s a bad news for farmers because the input price of per tractor might increase up to 25,000/-. The justification of this hike is attributed to the gap between input & output taxes. This can be understood as: • Tax rate on major tractor parts & components such as engines, transmissions, rear tires & tubes is proposed to be 28% • As a result, input cost per tractor may increase up to 25,000/- • Dealers might suffer from a huge loss as minimum stock of 1.5 tractors is maintained on regular basis • This would also squeeze working capital up to 1,600 Corer The Tractor Manufacturers’ Association (TMA) stated that the revised rate of 18% on minor tractor components is not much useful; the rate should be reduced on its core components too. Dealers are also quite disappointed as its parts & equipment can only be used in low-speed applications like tractor, not in any high-speed applications. CEOs of many leading companies including Tractors & Farm Equipment Limited (TAFE) and Escorts have requested for the price drop of 18% from 28% in inputs as the proposed rate will be a curse for all, especially farmers.