FSII Welcomes GST Relief on Seed Warehousing, Flags 2 Tax Cost Concerns

Key Highlights

• FSII welcomes the proposed GST exemption on seed storage and warehousing.

• Seeds will continue to attract nil GST, with no change in their existing rate.

• Faster refunds and wider capital goods ITC refund eligibility could support seed exporters.

• Proposed e-way bill and registration reforms could simplify compliance.

• FSII seeks clarity on 5% GST for specified e-commerce deliveries and 2% TDS on specified B2B waste and scrap transactions.

The Federation of Seed Industry of India (FSII) has welcomed the recommendations of the 57th GST Council meeting held in New Delhi, particularly the proposed GST exemption on storage and warehousing services for seeds meant for sowing. The industry body said the move could reduce costs across the seed value chain and support the availability of quality seeds for farmers.

FSII has also welcomed proposed reforms to improve export competitiveness, speed up tax refunds and simplify compliance for seed companies. However, it has called for greater clarity on two tax-related proposals involving e-commerce delivery services and business-to-business (B2B) waste and scrap transactions, which could increase costs or affect working capital for certain businesses.

GST Exemption on Seed Warehousing to Reduce Industry Costs

Seeds continue to attract a nil GST rate, and the latest recommendations do not change their existing tax treatment. However, GST paid on storage and warehousing services has so far remained an unrecoverable cost for the seed industry.

The proposed exemption on storage and warehousing services for seeds meant for sowing is expected to address this long-standing concern. Storage plays an important role in maintaining seed quality and viability before each sowing season.

By reducing warehousing expenses, the proposed measure could help seed companies manage their costs more effectively and strengthen the supply chain. It may also support farmers by improving access to quality seeds, which are essential for better crop productivity.

GST Reforms to Support Seed Exports and Cash Flow

FSII has welcomed the proposed measures aimed at improving India's export competitiveness. According to the industry body, faster, system-based GST refunds and expanded eligibility for refunds of input tax credit (ITC) on capital goods could improve cash flow for eligible seed exporters.

These changes could help businesses manage their working capital more efficiently and reduce delays associated with tax refunds. Better cash flow can be particularly important for exporters who need to invest in production, storage, logistics and other business operations.

The proposed reforms are part of broader efforts to make tax administration more efficient and support businesses involved in international trade.

Simplified Compliance for Seed Companies and Distributors

FSII has also welcomed proposed changes concerning e-way bill interception, GST registration and penalties. These measures could reduce compliance-related difficulties for seed companies, dealers and distributors transporting goods across state borders.

Timely transportation is particularly important for the seed sector because consignments must reach farmers and distributors within specific sowing windows. Delays during these periods can affect the availability of seeds when farmers need them most.

Simpler procedures and fewer compliance hurdles could help businesses move consignments more efficiently, improve distribution and reduce avoidable operational costs.

FSII Seeks Clarity on E-Commerce Delivery GST

While welcoming the broader reforms, FSII has highlighted two proposals that require further clarification.

The first concerns the proposed 5% GST without input tax credit on specified e-commerce delivery services. The restriction on claiming input tax credit could increase the effective tax cost for affected businesses, depending on the scope and application of the provision.

FSII intends to seek clarity on how this proposal would apply to the seed sector and whether it could create additional financial or operational challenges for businesses involved in seed distribution.

Concerns Over 2% TDS on B2B Waste and Scrap Transactions

The second concern relates to the proposed 2% tax deducted at source (TDS) on specified business-to-business waste and scrap transactions.

Although the measure concerns specified transactions, the deduction could affect the working capital of businesses covered by the provision. Companies may need to manage additional cash-flow requirements while complying with the applicable tax procedures.

FSII plans to examine the potential implications of both proposals with its members and engage with the Government to seek clarity on their scope and implementation.

The Federation has emphasised the importance of ensuring that tax reforms do not create disproportionate compliance requirements or additional costs for any segment of the seed industry.

FSII Highlights the Importance of Affordable Quality Seeds

Commenting on the GST Council's recommendations, Ajai Rana, Chairman of FSII, welcomed the focus on ease of doing business and the proposed warehousing exemption, which addresses a long-standing cost in the seed value chain.

He emphasised that quality seeds are the foundation of farm productivity and that reducing costs associated with storage, transportation and exports can ultimately strengthen farmers access to them.

Rana also said FSII would assess the implications of the proposed changes with its members and work constructively with the Government to obtain clarity on implementation. The objective is to ensure that the reforms benefit the industry without placing an excessive compliance or financial burden on any particular segment.

GST Reforms Expected to Take Effect from April 2027

Most of the procedural reforms recommended by the 57th GST Council are expected to take effect from 1 April 2027.

For the seed industry, the proposed warehousing exemption and export-related measures could help reduce costs, improve cash flow and simplify business operations. At the same time, clarity on the e-commerce delivery and waste-and-scrap tax proposals will be important to understand their final impact on affected businesses.

The proposed changes could support a more efficient seed supply chain, provided their implementation addresses the practical requirements of seed companies, dealers, distributors and exporters.

Also Read: Haryana Government Approves Purchase of Additional Paddy at MSP for Kharif 2026-27

CMV360 Says

FSII has welcomed the proposed GST exemption on seed warehousing and reforms aimed at improving exports, cash flow and compliance. These measures could reduce industry costs and strengthen the supply of quality seeds to farmers. However, the Federation wants clarity on the proposed 5% GST on specified e-commerce delivery services without input tax credit and 2% TDS on specified B2B waste and scrap transactions. Most procedural reforms are expected from April 2027.