Why is Indian farmer not happy with GST?

I have a friend whose friend's family lives in Maharashtra, working as farmers. For past few days my friend has lost his natural smile. When I asked him about it, he became sad.. and told me about his friend's (Rahim's - name changed) agony. Rahim was blaming GST.

I was shocked.. How could GST be the reason of his sadness?

I asked him to explain.. and what he told me, made me sad too.

He told me that Rahim's family back in Maharashtra is engaged in farming and agriculture. His father is director of a ‘Farmer Producer Company (FPC) which is more like a co-operative company.

In FPC, farmers come together to conduct their farming and business processes. Organizing themselves as a company help them to market themselves better, avoid the exploitation of middle-men and earn good money.. a good business sense I must say.

He told me that all the farmers were shareholders of the company. They would grow pulses on their land and then sell it to the company during the harvesting season.

The company would store the yield, and sell it when prices would fetch them good returns.

He further added that all the farmers decided to enter the retail market for branded dal that can potentially fetch even better returns than from raw un-milled pulses sales.

This meant that they would create a brand for their pulses and sell it in retail market like a normal company does.

This would create an even better market for them and may even open new markets.

On listening this I still could not figure out why was he sad. This seemed like a good plan if well executed.. But what he told me next appalled me.

He told me all was set for the execution of this plan, all the arrangements were taken care of, necessary permissions were obtained and everything was ready..

But then, GST happened..

And under GST, branded dal were taxed at 5%.

BOOM.. it was such a dampener.

Rahim's flight was grounded before it could even take off.

A tax of 5% on an item which was previously untaxed means higher cost, and lesser profits.

The cost to make a brand and spend money on such activities would not be sufficient or consummate for the profit it would derive after tax.

Now my friend’s sadness made sense to me.

“The current government at the Centre wants to double farmers’ income. When FPCs are companies of farmers, why should their incomes or products be taxed in the first place?” he said with disappointment in his voice.

And I agreed with him.. for such a step would certainly wouldn’t help in improving the situation of farmers. Rather it would always discourage them.

When I sat to think about it, I realised GST’s cost is not just about adding 5 per cent to the product price, there is also the cost of compliance.

One must keep in mind here that FPCs are all in rural areas. For their owners, who are farmers, uploading daily invoices and filing returns thrice every month is certainly a deterrent, just when they have started doing business.

It involves investing in computers and the GST billing software, which alone costs around Rs 20,000.

And when I researched about it, I found Maharashtra’s FPCs have been hit equally by the imposition of a 5 per cent GST on oilseeds, be it branded or otherwise.

So the farmers of oilseeds are the hardest hit. There is straight 5% tax on their products, doesn’t matter if branded or not.

When I learnt about all these things, I fell in deep silence too.

The great Indian farmer, and his plight post GST evokes sadness.

Did government didn't think about farmers or organisations representing them before implementing GST, remains a question to me...