GST cut on tractors to boost farm mechanisation, segment growth

The GST reduction on tractors from 12 per cent to 5 per cent will stimulate demand and accelerate farm mechanisation, according to experts. The expected price reductions will be between ₹30,000 and ₹60,000, depending on the model and capacity. 

“Before this announcement, we had anticipated industry growth of around 4–7 per cent for the year. With this change, the outlook improves significantly. The reduction is substantial for farmers, about ₹40,000 to ₹60,000 per tractor, which is a meaningful saving and will support fresh buying decisions by making tractors affordable and helping boost farm mechanisation and improving productivity and farmers’ income. We also expect most manufacturers to pass on the full benefit, ensuring that the farming community sees the maximum advantage,” Bharat Madan, Wholetime Director and Chief Financial Officer Escorts Kubota told businessline. 

Retail prices could fall by several percentage points, saving farmers significant amounts on each purchase. Importantly, it also resolves the inverted duty structure, easing cash flow and improving margins for manufacturers and suppliers.

“The tax relief will lower ownership costs, stimulate demand, and accelerate farm mechanisation. Manufacturers can expect stronger order books, while MSMEs and suppliers benefit from reduced cost pressures and smoother refunds. Positive investor sentiment already reflects optimism about improved profitability and competitiveness in the sector. By correcting input duty imbalances, the reform also strengthens supply-chain liquidity, allowing manufacturers to pass benefits down to end-users more sustainably,” said Nikhil Dhaka, Vice President, Primus Partners. 

Dealers

Dealers could temporarily witness issues in working capital pressure with consumers delaying their purchases. 

“In the short term, there could be some disruption as consumers may defer purchases during the transition period up to September 22. Dealers may also face some working capital pressure due to inventories held by them at the peak of the festive season since input tax credit accumulation will take longer to adjust. From a medium- to long-term perspective, the GST reset not only strengthens rural sentiments but is likely to be demand accretive,” added Bharat Madan. 

“The reduction of GST on new tractor tyres and tubes to 5 per cent will significantly benefit the industry. This reform will make tyres more affordable for customers across commercial, agricultural, and passenger vehicle segments, while also supporting rural mobility through lower input costs for farmers,” said Arnab Banerjee, MD & CEO, CEAT. 

Published on September 4, 2025