Query
1. Farmers are exempted from "Income Tax" but if farmer export then is exported income tax-free for farmers along with GST?
2. If we export products from registered farm & source products from registered farms, then are we eligible for income tax exemption along with Zero GST for Exports?
3. If farmer export / source from another farm then is he eligible for income tax exemption along with GST?
Opinion
At the outset it must be noted that the laws relating to income tax and goods and services tax operate independently.
Exemption under one law has no bearing on taxability or otherwise under the other law. Also, within the same law, each provision operates independently. Exemption under one provision need not necessarily mean exemption or denial of exemption under any other provision, unless explicitly spelt out.
Secondly, income tax deals with income over a one year period whereas GST is levied on each transaction of supply of goods or services or both. So, they are quite different from each other.
Now, the income tax law exempts agriculture income i.e income of a farmer from cultivation of land (which is relevant here), whether the goods are exported or not. It is an independent provision. The Income Tax law does not exempt income from exports, except in the case of units in Special Economic Zones.
Under the GST law many produce from agriculture do not attract tax. For goods that attract GST, the law allows export on payment of tax under refund claim or export without payment of tax against letter of undertaking. These are referred to as zero rated supplies.
A merchant exporter can procure goods on payment of 0.1% GST and export under a letter of undertaking. Alternately, he can procure the goods on payment of full GST and make zero rated exports.
With this background, the answers to the questions are as follows:
a. A farmer’s income from cultivation is not chargeable to income tax whether the goods are exported or sold in the domestic market. If the goods attract GST, he can either export without tax payment under letter of undertaking or export on payment of tax and claim refund of that.
b. Any person who procures goods from a farmer whether for domestic sale or for exports is a merchant. His income is taxable. If the goods attract GST, then a merchant exporter can either procure goods of payment of 0.1% GST and export under a letter of undertaking or procure the goods on payment of applicable GST and make zero rated exports.
c. A farmer who sources from another farm and exports is a merchant exporter. He can get same treatment as in (b) above.
