GST and the Farm-To-Nutraceutical Value Chain: A Strategic Management Perspective

Goods and Services Tax, Nutraceuticals, Input Tax Credit, Inverted Duty Structure, Agricultural Exemption, Classification Disputes

India’s Goods and Services Tax (GST) creates a pronounced cost asymmetry across the agriculture-to-
nutrition value chain: raw agricultural produce is almost entirely zero-rated or exempt, while nutraceuticals, dietary supplements, fortified foods, and functional beverages manufactured from that same produce are taxed at 12% to 18%. This paper examines that asymmetry as a management and competitiveness problem rather than purely a legal one. Using a qualitative document and case analysis of GST statutes, rate notifications, Advance Ruling and court decisions, and international benchmarks from the United Kingdom, Australia, Singapore, Canada, and the European Union, the paper shows how the exemption (rather than zero-rating) of agricultural inputs breaks the input tax credit (ITC) chain, locking up manufacturer working capital, eroding margins, and weakening the competitive position of domestic nutrition producers relative to importers. Classification disputes between FSSAI’s regulatory categories and GST’s HSN-based system add further compliance risk and inconsistent tax exposure across states. The paper concludes with a two-track set of recommendations: structural policy reforms — converting agricultural exemptions to zero-ratings, creating a dedicated public-health-aligned GST rate for nutrition products, and establishing a national classification authority — and firm-level strategic responses in product design, tax risk management, working-capital planning, and collective industry advocacy.