Escorts Kubota, a leading manufacturer of agricultural tractors and engines, saw its shares surge 14% intraday on Thursday, September 4, to ₹4,180 after the GST Council reduced the tax on tractors.
The council also cut the GST on tractor tyres, lifting market sentiment as the company derives most of its revenue from agri-machinery products. The move is expected to support margins and boost demand.
Other beneficiaries included VST Tillers Tractors and Mahindra & Mahindra, whose shares also jumped up to 10% following the announcement. These GST cuts on tractors come at a perfect time, supported by favorable rural conditions such as timely and widespread monsoon rains, healthy water reservoir levels, and an early start to the festive season this year.
With Kharif sowing surpassing last year’s acreage, experts believe that the rate cut, ahead of the peak festive season, will further boost demand for tractors and farm machinery in the coming months.
GST on tractors and parts slashed to 5%
Under the revised structure, GST on tractor tyres and parts has been lowered from 18% to 5%, while the tax rate on tractors has dropped from 12% to 5%. The changes also extend to key farm inputs such as certain bio-pesticides and micronutrients, which will now attract 5% GST instead of 12%.
In addition, the government reduced GST on all farm machinery used in soil preparation, cultivation, harvesting, and threshing to 5% from the earlier 12%.
The rate cuts are expected to make tractors more affordable, particularly at a time when farmers are grappling with rising input costs. Analysts believe the move will encourage small and marginal farmers to adopt mechanisation, which is critical for improving agricultural productivity.
Finance Minister Nirmala Sitharaman, at the 56th GST Council meeting, said the decision was aimed at supporting the “common man, labor-intensive sectors, and agriculture,” while also addressing long-standing anomalies in the tax framework.
According to ICRA, the tractor industry is projected to grow 4–7% in FY26, supported by healthy monsoon conditions and strong farm sentiment. While retail tractor sales dipped 1% in FY25, the sector has already begun showing signs of recovery, with July 2025 wholesale volumes rising 8% year-on-year.
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