GST Dispute Puts Isabgol Trade on Hold; Industry Demands Urgent National Clarity

Conflicting Gujarat and Rajasthan rulings over GST treatment of naturally procured Isabgol seeds create uncertainty for farmers, traders and processors

Bilkul Bazaar

Ahmedabad

The Isabgol Processors Association (IPA) has called for an urgent, nationally applicable clarification on the GST treatment of naturally procured Isabgol (Psyllium) seeds, after conflicting interpretations by GST authorities in Gujarat and Rajasthan disrupted trading activity in one of India’s key Isabgol markets.

The Association has urged the GST Council, Ministry of Finance, CBIC and Tax Research Unit (TRU) to settle whether Isabgol seeds purchased directly from farmers in their natural condition, without intentional drying or processing, should qualify as ‘fresh’ and attract Nil GST, or be treated as ‘dried’ and taxed at 5%.

The issue has assumed significance in view of the CBIC FAQ stating that fresh Isabgol seeds attract Nil GST, while dried or frozen seeds attract 5% GST.

Gujarat, Rajasthan Deliver Contradictory GST Rulings

The industry’s immediate concern stems from sharply different interpretations emerging from Gujarat and Rajasthan on apparently similar transactions.

The Gujarat Authority for Advance Ruling, in GUJ/GAAR/R/2026/21 dated May 29, 2026, held that Psyllium seeds supplied in their natural, raw and unprocessed form and procured directly from farmers through APMC auctions qualify as fresh Isabgol seeds and are therefore exempt from GST. The ruling specifically noted that the seeds had not undergone drying, freezing, crushing or other processing.

Rajasthan authorities, however, have taken a different position.

In In Re: M/s Surendra Bucha (RAJ/AAR/2026-27/03), the Rajasthan AAR held that Isabgol seeds supplied by APMC traders to processing units attract 5% GST, reasoning that the seeds acquire a dried character through storage in dry and ventilated conditions, even in the absence of intentional drying.

Further Rajasthan rulings reported in August have also denied the Nil-GST exemption and classified Isabgol seeds as taxable at 5%.

Industry Fears Tax Exposure from Divergent Interpretations

The conflicting rulings have created uncertainty for businesses operating across Gujarat, Rajasthan and Madhya Pradesh, leaving traders concerned about potential tax demands, interest and penalties.

Isabgol Trading Activity Grinds to a Halt

The uncertainty has disrupted the movement and sale of fresh Isabgol seeds across the major trading regions.

Traders are reportedly reluctant to issue invoices without clarity on the applicable GST rate. At the same time, farmers are facing difficulties in selling their produce, while processors are uncertain about the availability and cost of their key raw material.

The impact is particularly acute in Unjha, one of India’s major Isabgol trading centres, where the GST dispute has reportedly brought trading activity to a standstill as stakeholders await a common tax position.

Export-Oriented Industry Faces Working-Capital Impact

Isabgol seeds are the principal raw material used to manufacture Isabgol Husk, a product with a strong export orientation.

According to the IPA, approximately 90% of finished Isabgol Husk is exported, while around 10% is sold in the domestic market at 5% GST.

The industry’s procurement cycle adds further urgency to the matter. Nearly 70% of annual Isabgol seed procurement takes place between April and June, while exports continue throughout the year.

The Association has also warned that imposing GST on naturally procured fresh seeds could lead to substantial working-capital blockage through input tax credit, particularly for an export-oriented industry where such credit would ultimately have to be utilised or refunded.

IPA Calls for One Uniform National Interpretation

Farmers, Traders, Processors and Exporters Need a Single Rule

Mr. Ashwin Nayak, Chairman, Isabgol Processors Association, said the industry needs a clear and uniform interpretation that can be followed consistently by farmers, traders, processors and exporters across states.

The IPA has appealed to the GST Council, Ministry of Finance, CBIC and TRU to examine the matter and issue a nationally applicable clarification on whether Isabgol seeds purchased from farmers in their natural condition and supplied to processing units without intentional or mechanical drying should be treated as fresh and therefore exempt from GST.

Immediate Clarification Needed to Restore Market Confidence

The Association said an early clarification would help restore confidence in the Isabgol seed market, protect farmers from disruption, ensure uniform GST compliance, prevent future tax disputes and safeguard uninterrupted production and exports of Isabgol products.

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