GST and tax basics every small farm seller should understand

Tax law in India treats agricultural produce more gently than almost any other category. Most fresh produce sold by a farmer is exempt from GST entirely. But the gentle treatment ends once you start processing, branding, or selling at industrial scale. This guide walks through the lines that matter for a small direct-online seller.

Disclaimer: this article is educational, not legal advice. For your specific case, consult a Chartered Accountant.

What is fully exempt from GST

The following, sold loose or in non-branded packaging by a farmer, are exempt under current GST rules (as of 2026):

• Fresh fruits and vegetables (whole or cut, but not dehydrated, not frozen)
• Unbranded cereals — wheat, rice, maize, millets — sold loose or in plain jute bags
• Unbranded pulses — chana, moong, tur, urad — sold loose or unmarked
• Fresh milk (not flavoured, not concentrated)
• Whole spices in their natural form, unbranded
• Sugarcane, fresh and unprocessed
• Live animals and birds (livestock)
• Eggs in shell

For these items, no GST registration is required regardless of turnover, and no invoice tax line is needed.

Where GST starts to apply

The moment you process or brand, the goods move into taxable categories. Some common examples:

• Cereals or pulses packed in branded bags with your logo and a name — 5 percent GST
• Roasted, salted, or fried nuts — 12 percent GST
• Pickles, jams, sauces, syrups — 12 percent GST
• Cleaned and polished pulses sold under a brand — 5 percent GST
• Ghee — 12 percent GST
• Honey in packaged form — exempt if unbranded, 5 percent if branded
• Tea, coffee — 5 percent GST (raw produce); higher when processed

The ₹20 lakh registration threshold

Even if your goods fall into a taxable category, you only need to register for GST if your annual turnover exceeds ₹20 lakh (₹40 lakh for goods sellers in most states, ₹10 lakh in special category states). Below this, you can operate without a GSTIN.

Note: if you sell on a digital marketplace that itself is registered, some platforms require you to register regardless. Online Mandi does not currently require GSTIN from sellers, but for some large B2B platforms it is mandatory. Check before you list there.

Income tax — different from GST

Agricultural income (income from cultivation and basic processing of own-grown produce) is exempt from income tax in India under Section 10(1). This is one of the strongest tax incentives in the law and is why many farmers do not file income tax returns.

But the exemption has limits:

• It applies only to produce you grew yourself, on land you own or lease
• Resold produce (bought from neighbours and sold further) is business income, not agricultural income, and is taxable
• Processed products like jams, pickles, and packaged goods are business income
• If your total income exceeds ₹2.5 lakh, you should file an ITR even if it is all agricultural — to maintain a record

Keep a simple cash book

Whether or not you pay tax, you should keep a basic cash book. Two columns: money in, money out. Write down each sale and each expense the day it happens. Three reasons this matters:

• Establishes your income for bank loans, KCC limits, and subsidies
• Protects you in case of any future tax notice
• Helps you actually know whether you are making money on each crop

When to talk to a CA

Most small direct sellers never need a Chartered Accountant. You should consider one if any of these apply:

• Annual turnover crosses ₹15 lakh
• You are starting to brand or process your produce
• You are selling across state borders in significant volume
• You take on a partnership or business loan
• You receive any notice from the tax department

A CA visit for a small farm usually costs ₹2,000 to ₹5,000 a year and is worth it once your business reaches a scale where mistakes get expensive.