Looking for expert help with GST and income tax for seed companies and seed processing plants 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
- Seeds for sowing are nil GST under Notification 10/2025-Central Tax (Rate), S. No. 56, 77 to 84, whether sold loose or in branded packets.
- From 1 November 2026, storage or warehousing of seeds meant for sowing is exempt too (Notification 07/2026-Central Tax (Rate), entry 24B).
- Rejected cotton seed, soya bean or groundnut sold for crushing is 5%. One such taxable line means you may have to register, and exempt seed sales count towards the Rs 20 lakh Telangana limit.
- A registered seed company reverses most of its common input tax credit every month under Rule 42, and gets no credit at all on seed packets and pouches.
- Pay growers directly if you pay in cash, deduct 2% TDS on organiser commission above Rs 20,000, and check 194Q if your turnover is above Rs 10 crore.
Is GST charged on seeds for sowing in India? No. Notification 10/2025-Central Tax (Rate) exempts all goods of seed quality in Chapters 07, 09, 10 and 12 and seeds of a kind used for sowing under heading 1209, from 22 September 2025, with no packaging condition. From 1 November 2026, storing seeds meant for sowing in a warehouse is also exempt (Notification 07/2026-CT(R)).
Telangana is one of India's biggest seed hubs, and most of the seed companies and processing plants around Hyderabad have the same tax profile. Their main product is GST-free, but almost everything they buy carries 18%. They pay hundreds of growers in a few weeks after harvest, often through organisers, and they sell rejected lots to oil mills and grain traders. That creates a handful of recurring questions. Do we need GST registration at all? Why is our credit ledger always short? Is the new warehousing exemption ours to use? Can we pay growers in cash? This guide covers GST law in force in November 2026 and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 references that apply from 1 April 2026. If you run a retail agri-input shop instead, see our fertiliser, pesticide and seed shop guide.
GST rates for a seed company, line by line
Your seed is nil. Most of the rest of your invoice book isn't. Here's how the common lines sit.
Comparison
GST on What a Seed Company Sells and Buys
| Item (HSN) | GST | Entry |
|---|---|---|
| Vegetable, pulse and cereal seed of seed quality (Ch 07, 09, 10) | Nil | 10/2025-CT(R), S. No. 56 |
| Oilseeds and other Ch 12 goods of seed quality: soya, groundnut, linseed, mustard, sunflower, cotton seed (Ch 12) | Nil | 10/2025-CT(R), S. No. 77 to 83 |
| Seeds, fruit and spores of a kind used for sowing: hybrid vegetable and flower seed, fodder seed (1209) | Nil | 10/2025-CT(R), S. No. 84 |
| Rejected oilseeds and cotton seed, 'other than of seed quality' (Ch 12, 1201 to 1207) | 5% | 9/2025-CT(R) Schedule I, S. No. 60 to 67 |
| Rejected paddy, maize, jowar, bajra, ragi, sold loose (1005 to 1008) | Nil | 10/2025-CT(R), S. No. 66 to 69 |
| Storage or warehousing of seeds meant for sowing (from 1 Nov 2026) | Nil | 12/2017-CT(R), S. No. 24B, as substituted by 07/2026-CT(R) |
| Seed cleaning, sorting and grading machines (8437) | 18% | 9/2025-CT(R) Schedule II, S. No. 424 |
| Fungicides and insecticides for seed treatment (3808) | 18% | 9/2025-CT(R) Schedule II, S. No. 95 |
| Listed bio-pesticides (3808) | 5% | 9/2025-CT(R) Schedule I, S. No. 260 |
| Plastic pouches and containers for packing (3923) | 18% | 9/2025-CT(R) Schedule II, S. No. 124 |
Source: Notifications 9/2025 and 10/2025-Central Tax (Rate) and 07/2026-Central Tax (Rate), read from taxinformation.cbic.gov.in. Inter-State seed sales are exempt under the same serial numbers of 10/2025-Integrated Tax (Rate). The 2026 goods rate amendments (01/2026 to 03/2026-CT(R)) don't change these entries.
Three points from that table matter in practice:
- Packing doesn't change the rate. Grain entries in 10/2025 are nil only when "other than pre-packaged and labelled". The seed entries (S. No. 56, 77 and 84) have no such condition. A 450 g branded cotton seed packet is as nil as a 30 kg bag of paddy seed.
- "Seed quality" is the test. The same cotton seed is nil when it's sold for sowing and 5% when it's sold to a crushing unit. S. No. 84 says it "does not cover seeds meant for any use other than sowing". Your invoice description and buyer should match the use.
- Your inputs are 18%. Machines, treatment chemicals, pouches and most services you buy are taxable, while your output is nil. That gap is the main GST cost in this business, and the next sections explain why you can't recover most of it.
The 1 November 2026 change: warehousing of seeds is now exempt
Many seed companies store processed seed for months between harvest and the next sowing season, often in third-party warehouses. Until 31 October 2026, entry 24B of Notification 12/2017-Central Tax (Rate) read "storage or warehousing of cereals, pulses, fruits and vegetables" (Notification 04/2022-CT(R), effective 18 July 2022). Seeds weren't named.
From 1 November 2026, Notification 07/2026-Central Tax (Rate) substitutes entry 24B with "Services by way of storage or warehousing of cereals, pulses, fruits, vegetables, and seeds meant for sowing". The matching IGST entry is S. No. 25B of 9/2017-Integrated Tax (Rate), amended by 07/2026-Integrated Tax (Rate). The notification also adds a definition. "Seed" means any plant material used or intended for propagation or sowing, including seedlings, tubers, bulbs, rhizomes, roots, cuttings, grafts, tissue culture plantlets and other planting material, and it covers seeds of cereals, pulses, oilseeds, fibre, fodder, fruits, vegetables, spices, flowers and plantation crops.
Why it matters to you. A seed company with only exempt sales can't use the GST it pays on storage. That GST is a straight cost. Say you pay a warehouse Rs 1,50,000 a month to hold hybrid seed. At 18%, that was Rs 27,000 of GST a month. If the warehouse bills the November 2026 to March 2027 storage as exempt, that's Rs 1,35,000 less cost for the rest of the year.
Check what you're actually buying. The exemption is for storage or warehousing services. If you simply rent a godown and run it yourself, your landlord may treat that as renting of immovable property rather than a storage service. Read the contract and ask your warehouse which entry it is billing under before you assume the bill should be nil.
Do you need GST registration?
Step-by-Step Guide
Registration Test for a Seed Company
Only nil supplies?
If every sale is seed of seed quality or another exempt supply, Section 23(1)(a) of the CGST Act says you aren't liable to register, at any turnover.
Any taxable line?
Rejected oilseed sold for crushing (5%), sale of used machinery, scrap, consultancy or trait licence income all count. One taxable line ends the Section 23(1)(a) exclusion.
Add exempt sales to the turnover
Aggregate turnover includes exempt supplies (Section 2(6)). Compare total sales, nil seed included, with the State limit.
Apply the State limit
Goods suppliers can stay unregistered up to Rs 40 lakh under Notification 10/2019-Central Tax, but Telangana is excluded from that notification, so the limit there is Rs 20 lakh.
Inter-State taxable sales
A taxable supply to a buyer in another State makes registration compulsory under Section 24(i), whatever your turnover.
Source: CGST Act 2017, Sections 2(6), 22, 23(1)(a) and 24(i); Notification 10/2019-Central Tax
Worked example. A Hyderabad seed company sells Rs 3 crore of hybrid cotton and vegetable seed packets in FY 2026-27. After germination testing, it sells Rs 25 lakh of rejected cotton seed to an oil mill. The rejected lot is "other than of seed quality", so it's 5%: Rs 25,00,000 x 5% = Rs 1,25,000 of GST. Aggregate turnover is Rs 3.25 crore, well above Rs 20 lakh, so the company must register and file returns. Without that rejected lot, it could have stayed out of GST altogether.
Your growers don't need to register for selling you seed they grew. Section 23(1)(b) excludes "an agriculturist, to the extent of supply of produce out of cultivation of land". Our GST registration service handles the application if you need one.
Why a registered seed company loses most of its input tax credit
Credit on goods and services used for exempt supplies isn't allowed (Section 17(2) of the CGST Act). Rule 42 of the CGST Rules splits it three ways each month:
- Used only for exempt seed sales: no credit. Seed pouches, printed packets and seed treatment chemicals usually fall here.
- Used only for taxable sales: full credit. This is rare in a seed company.
- Common inputs and services: reverse the exempt share. The formula is D1 = (E ÷ F) x C2, where E is exempt turnover, F is total turnover and C2 is common credit.
Say in one month your exempt seed sales are Rs 24 lakh and taxable rejected-lot sales are Rs 2 lakh, so total turnover is Rs 26 lakh. Common credit (plant maintenance, software, security, audit fees) is Rs 60,000. You reverse Rs 60,000 x 24 ÷ 26 = Rs 55,385 and keep Rs 4,615. Machinery is handled under Rule 43 over its useful life on the same logic. Our Rule 42 and 43 guide explains the annual true-up.
Seed processing done for someone else
If your plant cleans, grades, treats or packs seed owned by another company, you're supplying a service, and your seed's nil rate doesn't pass to your fee. Two exemptions in Notification 12/2017-CT(R) come up, but both are narrow. S. No. 54(c) exempts processes like cleaning, sorting, grading and bulk packaging only when "carried out at an agricultural farm" and only where they don't alter the produce's essential characteristics. S. No. 55 exempts an intermediate production process as job work "in relation to cultivation of plants".
A processing plant on an industrial plot doesn't fit 54(c). For job work under heading 9988, Notification 15/2025-Central Tax (Rate) sets 5% for job work on "food and food products falling under Chapters 1 to 22" and 18% for other job work. Whether sowing seed counts as a "food product" for that entry isn't settled, so we don't state one rate here. Get the classification confirmed before you bill your first lot. Our job work GST guide covers the challan and return rules.
Income tax: grower payments, organisers and large purchases
Agricultural income or business income? Agricultural income under Section 2(1A) of the 1961 Act (Section 2(5) of the 2025 Act) is income from land used for agriculture, including sale by a cultivator of produce on which no process has been done other than what a cultivator ordinarily does to take it to market. A seed company that buys seed from growers and processes, treats and brands it earns business income, even though every rupee started on a farm. Where the company grows foundation seed on its own leased land, only that produce, in its market-ready state, can qualify. Income from saplings or seedlings grown in a nursery is agricultural income under Explanation 3 to Section 2(1A). Our agricultural income guide covers partial integration for individual owners.
Paying growers in cash. Cash expenses above Rs 10,000 to one person in a day are disallowed under Section 40A(3) of the 1961 Act (Section 36(4) of the 2025 Act). Payments for agricultural produce made to "the cultivator, grower or producer" are an exception (Rule 6DD(e) of the 1962 Rules; Rule 26(1)(e)(i) of the Income-tax Rules 2026). Pay a grower Rs 45,000 in cash for their seed crop and the deduction stands, provided your voucher shows the grower's name, village and quantity. Hand the same Rs 45,000 to a seed organiser to pass on and the whole amount is disallowed. Our Section 40A(3) guide lists the other exceptions.
Comparison
TDS a Seed Company Commonly Deducts
| Payment | 1961 Act (FY 2025-26) | 2025 Act (from 1 Apr 2026) | Rate and threshold |
|---|---|---|---|
| Commission to seed organisers for arranging growers | Section 194H | Section 393(1), Table Sl. No. 1(ii) | 2% once commission to one payee exceeds Rs 20,000 in the year |
| Purchase of goods by a buyer with turnover above Rs 10 crore last year | Section 194Q | Section 393(1), Table Sl. No. 8(ii) | 0.1% of purchases from one seller above Rs 50 lakh in the year |
| Seller-side TCS on sale of goods | Section 206C(1H) | Not carried forward | Doesn't apply from 1 April 2025 |
Source: Income-tax Act 1961 as amended by Finance Act 2025 (Sections 194H, 194Q, 206C(1H) third proviso); Income-tax Act 2025 as amended by Finance Act 2026, Section 393(1) Table and Section 402(6) 'buyer' definition
Organiser commission. An organiser who lines up 40 growers gets Rs 2.50 a kg on 60,000 kg, which is Rs 1,50,000. That's above Rs 20,000, so you deduct 2%, Rs 3,000, and file it in your quarterly TDS return. 194Q on bulk buying. Your turnover last year was Rs 40 crore and you buy Rs 90 lakh of processed seed from one other company in FY 2026-27. TDS is 0.1% of the Rs 40 lakh above Rs 50 lakh, so Rs 4,000. Most individual growers sell you far less than Rs 50 lakh a year, so 194Q rarely bites on them. See our 194Q guide and 194H guide. We handle the returns through our TDS filing service.
Producer companies. Farmer producer companies that market members' seed often ask about Section 80PA. It allowed a 100% deduction to producer companies with turnover below Rs 100 crore, but only for assessment years from 1 April 2019 to before 1 April 2025. It isn't available for AY 2026-27.
Proprietors and firms. A resident individual, HUF or partnership firm running a small seed processing unit can use Section 44AD (Section 58 of the 2025 Act) if turnover is within Rs 2 crore, or Rs 3 crore where cash receipts are within 5%, declaring 6% of digital receipts and 8% of the rest. Companies and LLPs can't use it. A company that opts for Section 115BAA pays tax at 22% plus surcharge and cess. Our ITR filing service and ROC compliance service cover the annual filings for a seed company.
Common mistakes seed companies make
- Selling rejected cotton seed or soya with a "seed" description at nil. If the buyer is a crushing unit, it's "other than of seed quality" and 5%.
- Leaving exempt seed sales out of the registration test. They count in aggregate turnover under Section 2(6).
- Claiming full credit on common costs. Reverse the exempt share every month under Rule 42. Credit on seed packets isn't available at all.
- Paying 18% on seed storage from November 2026 without asking why. Check whether your warehouse should be billing under the new entry 24B.
- Paying growers through an organiser in cash. The Rule 6DD(e) exception covers payments to the grower, not to a middleman.
- Skipping TDS on organiser commission. Deduct 2% once the year's commission to one person crosses Rs 20,000.
How Tax Garden helps seed companies
We map each of your product and rejection lines to the right nil or 5% entry, set up the monthly Rule 42 reversal in your books, and check whether your warehousing bills should be exempt from November 2026. Our GST return filing service files your GSTR-1 and GSTR-3B, and new units can start with GST registration. If you also gin cotton or store produce, read our guides for cotton ginning mills and cold storage owners. Seedling growers should also see our nursery and plant shop guide.
