Looking for expert help with Income tax for fertilizer shop owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Fertilisers (HSN 3102 to 3105) are taxed at 5% GST, chemical pesticides (HSN 3808) at 18%, and 12 listed bio-pesticides at 5%, effective 22 September 2025 (Notification 9/2025-Integrated Tax (Rate)).
- Seeds for sowing are GST-exempt, so a shop selling seeds plus fertilisers has to reverse part of its common input tax credit (ITC) under Rule 42 of the CGST Rules.
- Exempt seed sales count toward aggregate turnover. In Telangana the registration threshold for goods is Rs 20 lakh, not Rs 40 lakh.
- Your shop profit is business income, not exempt agricultural income. Section 44AD deems 6% or 8% of turnover as profit.
What GST rate applies to fertilizers, pesticides and seeds in India? Chemical and mineral fertilisers attract 5% GST. Chemical pesticides, fungicides and herbicides attract 18%, while 12 named bio-pesticides such as neem-based pesticides attract 5%. Seeds used for sowing are exempt. These rates apply from 22 September 2025 under Notification 9/2025-Integrated Tax (Rate) and Notification 2/2017-Central Tax (Rate).
An agri-input shop looks simple on paper: buy bags from the company or distributor, sell to farmers. The tax side isn't. You sell goods at three different GST rates plus one exempt line, most of your customers pay in cash or UPI during a few sowing weeks, and fertiliser MRPs are fixed, so you can't pass on any tax mistake. This guide covers what a fertiliser, pesticide and seed dealer needs for GST and for the AY 2026-27 income tax return. If you run a general store, see our kirana store tax guide instead.
Which GST rate applies to each product on your shelf?
Get the rate right per product line first. Everything else, from ITC to the composition decision, follows from it.
Comparison
GST Rates for Agri-Input Shops (from 22 September 2025)
| Product | HSN | GST rate |
|---|---|---|
| Urea, DAP, MOP, NPK and other mineral or chemical fertilisers | 3102 to 3105 | 5% |
| Organic manure, pre-packaged and labelled | 3101 | 5% |
| Organic manure, loose or unbranded | 3101 | Exempt |
| Micronutrients registered under the Fertilizer Control Order, 1985 | 28 or 38 | 5% |
| Bio-pesticides on the notified list (neem-based, Trichoderma, Bt strains, NPV and others) | 3808 | 5% |
| Chemical insecticides, fungicides, herbicides, plant-growth regulators | 3808 | 18% |
| Gibberellic acid | 29 or 3808 93 | 5% |
| Seeds, fruit and spores for sowing | 1209 | Exempt |
| Mechanical sprayers, drip and sprinkler systems | 8424 | 5% |
Source: Notification 9/2025-Integrated Tax (Rate), Schedule I S. No. 221, 222, 237 to 241, 260, 431 and Schedule II S. No. 95; Notification 2/2017-Central Tax (Rate), S. No. 86 and 108
The bio-pesticide list is closed. It covers 12 named items only: Bacillus thuringiensis var. israelensis, kurstaki and galleriae, Bacillus sphaericus, Trichoderma viride, Trichoderma harzianum, Pseudomonas fluorescens, Beauveria bassiana, NPV of Helicoverpa armigera, NPV of Spodoptera litura, neem-based pesticides and Cymbopogon. A product marketed as "organic" or "herbal" that isn't on this list stays at 18%.
Fertiliser MRPs include GST. So on a bag with an MRP of Rs 1,350, your GST is Rs 1,350 x 5/105 = Rs 64.29, and the taxable value is Rs 1,285.71. Don't add 5% on top of the MRP.
Do you need GST registration if you mostly sell seeds?
If you sell only exempt goods, such as seeds for sowing and loose organic manure, you don't need to register (Section 23(1)(a), CGST Act). Once you add even one taxable line, the threshold test uses aggregate turnover, and that includes your exempt seed sales.
- Most states: Rs 40 lakh for suppliers of goods only (Notification 10/2019-Central Tax).
- Telangana, Uttarakhand, Puducherry, Sikkim, Tripura, Arunachal Pradesh, Manipur, Meghalaya, Mizoram and Nagaland are excluded from the Rs 40 lakh limit, so the lower threshold applies there. In Telangana that's Rs 20 lakh.
Say a dealer in Nalgonda sells Rs 12 lakh of seeds and Rs 10 lakh of fertilisers in a year. Taxable sales alone are Rs 10 lakh, but aggregate turnover is Rs 22 lakh, which is above Rs 20 lakh. Registration is required. More detail is in our GST registration threshold guide.
How much ITC do you reverse because seeds are exempt?
ITC on stock you buy for resale is simple: fertiliser purchase ITC goes against fertiliser sales, and pesticide ITC against pesticide sales. Seed purchases usually carry no GST. The problem is common credit: shop rent, a godown, the billing software, the accountant's fee. These serve the exempt seed business too, so Rule 42 makes you reverse the exempt share.
Step-by-Step Guide
Rule 42 Reversal for a Fertiliser and Seed Shop
Split your ITC
Credit used only for taxable goods (fertiliser, pesticide purchases) is fully claimable. Credit used only for seeds is fully blocked. Everything used for both is common credit (C2).
Find the exempt share
Exempt turnover divided by total turnover for the tax period. Seeds Rs 15 lakh out of Rs 1 crore total = 15%.
Reverse that share of C2
Rent of Rs 30,000 a month plus 18% GST gives C2 of Rs 64,800 a year. Reverse 15%, which is Rs 9,720. Claim the balance Rs 55,080.
Add 5% if there is personal use
If some common inputs are also used for non-business purposes, Rule 42 treats a further 5% of C2 as ineligible.
True up after the year ends
Reverse monthly in GSTR-3B, then recompute on full-year turnover and adjust the difference by the due date of the September return of the next year, with interest on any shortfall.
Source: Rule 42, CGST Rules 2017
See our Rule 42 and 43 guide for the full formula, including capital goods under Rule 43.
Is the composition scheme cheaper for an agri-input shop?
A trader under composition pays 1% (0.5% CGST plus 0.5% SGST) on the turnover of taxable supplies only, so exempt seed sales carry no composition tax (Rule 7, CGST Rules). The eligibility limit is Rs 1.5 crore of aggregate turnover in most states, including Telangana. The catch is that you lose all ITC, and fertiliser prices are capped by MRP, so the lost credit comes out of your margin.
Here's the same Rs 1 lakh purchase under both schemes, with the farmer paying the same final price:
Comparison
Regular vs Composition: What the Dealer Keeps on Rs 1 Lakh of Purchases
| Fertiliser (5%) | Chemical pesticide (18%) | |
|---|---|---|
| Purchase value + GST paid to supplier | Rs 1,00,000 + Rs 5,000 | Rs 1,00,000 + Rs 18,000 |
| Price paid by farmer | Rs 1,13,400 | Rs 1,35,700 |
| Regular: GST paid in cash (output minus ITC) | Rs 5,400 - Rs 5,000 = Rs 400 | Rs 20,700 - Rs 18,000 = Rs 2,700 |
| Regular: dealer keeps | Rs 8,000 | Rs 15,000 |
| Composition: 1% of Rs 1,13,400 / Rs 1,35,700 | Rs 1,134 | Rs 1,357 |
| Composition: dealer keeps (price - purchase incl. GST - composition tax) | Rs 7,266 | Rs 16,343 |
| Better option | Regular, by Rs 734 | Composition, by Rs 1,343 |
Source: Worked example. Composition rate: Rule 7, CGST Rules 2017
So a shop that is mostly fertiliser tends to do better on the regular scheme, while a pesticide-heavy shop may do better under composition. Run your own year's numbers before you opt in. Remember that a composition dealer can't sell inter-state, issues a bill of supply instead of a tax invoice, and files CMP-08 quarterly and GSTR-4 annually. Our composition scheme guide lists the rest of the conditions.
How is your shop income taxed?
Your margin on fertiliser, pesticide and seed sales is business income. Section 10(1) exempts agricultural income, which is income from land used for agriculture. Selling inputs to farmers doesn't qualify, even if every customer is a farmer. If you also cultivate your own land, that income stays exempt but is added in for rate purposes under partial integration; see our agricultural income guide.
Most small dealers use Section 44AD and file ITR-4:
- Turnover limit: Rs 2 crore, or Rs 3 crore if cash receipts don't exceed 5% of total receipts. Many agri-input shops take a lot of cash, so plan for the Rs 2 crore limit.
- Deemed profit: 6% of receipts by bank, UPI or other digital modes, 8% of the rest.
- From tax year 2026-27 (FY starting 1 April 2026), this scheme sits in Section 58 of the Income-tax Act 2025. AY 2026-27 returns still use Section 44AD of the 1961 Act.
Worked example (AY 2026-27, new regime): Turnover Rs 1 crore, of which Rs 60 lakh came by UPI and bank and Rs 40 lakh in cash.
- Deemed profit: 6% x Rs 60 lakh + 8% x Rs 40 lakh = Rs 3.6 lakh + Rs 3.2 lakh = Rs 6.8 lakh.
- Tax on slabs: nil up to Rs 4 lakh, 5% on the next Rs 2.8 lakh = Rs 14,000.
- Section 87A rebate (income up to Rs 12 lakh) = Rs 14,000. Tax payable: nil.
Under the old regime the same Rs 6.8 lakh, with Rs 1.5 lakh of Section 80C deductions, leaves taxable income of Rs 5.3 lakh. Tax is Rs 12,500 + Rs 6,000 = Rs 18,500, plus 4% cess = Rs 19,240. Compare both regimes with our old vs new regime guide.
If your real net profit is below 6% or 8% after rent, staff wages and transport, you can keep full books and declare the actual figure instead. Two things to weigh first. If you opted for Section 44AD and then leave it, you can't return for the next five years, and during those years you need books and a tax audit whenever your income exceeds the basic exemption limit (Section 44AD(4) and (5), Section 44AB(e)). And outside Section 44AD, a turnover above Rs 1 crore (Rs 10 crore if cash receipts stay within 5%) needs a tax audit under Section 44AB(a).
Large dealers: if your turnover in the previous year exceeded Rs 10 crore, you must deduct 0.1% TDS on purchases above Rs 50 lakh a year from any one supplier (Section 194Q for FY 2025-26; see our Section 194Q guide for the 2025 Act position).
What mistakes do agri-input dealers make most often?
- Charging 5% on everything. Chemical pesticides are 18%. Only the 12 named bio-pesticides are 5%.
- Leaving seeds out of turnover. Seed sales count toward aggregate turnover for the registration threshold, and the exempt share drives the Rule 42 reversal. Skipping both is a common trigger for a GST notice.
- Calculating GST on top of the MRP. Fertiliser MRPs are tax-inclusive. Back out the tax at 5/105.
- Treating shop income as agricultural income. It is business income and must go in the return.
- Paying suppliers in cash above Rs 10,000 a day. If you claim actual expenses, Section 40A(3) disallows such payments; see our Section 40A(3) guide.
How Tax Garden helps
Tax Garden files GSTR-1 and GSTR-3B for agri-input dealers with seed and fertiliser turnover split correctly and the Rule 42 reversal calculated each month. We also prepare your ITR-4 or ITR-3 and check whether presumptive tax or actual books gives the lower lawful tax. See our pricing for plans.
