Isabgol GST Dispute Puts Unjha Trade Under Fresh Pressure
GST dispute puts Unjha Isabgol trade under pressure
A dispute over how fresh Isabgol seeds should be treated under the Goods and Services Tax has disrupted trading at Unjha, Gujarat, one of India’s main centres for psyllium seed and husk.
The issue is over a simple question with major financial consequences: when Isabgol seeds are bought from farmers in their natural form, without any deliberate drying or processing, should they be treated as fresh and carry no GST, or as dried seeds and carry 5% GST?
The Central Board of Indirect Taxes and Customs (CBIC) says fresh Isabgol seeds attract Nil GST, while dried or frozen seeds attract 5%. Isabgol husk is taxed at 5%. The seeds fall under HSN heading 1211.
The uncertainty has become a serious issue for traders, farmers and processing units because the same product can move through several states before it reaches a processing factory or an export market.
The Gujarat Authority for Advance Ruling (GAAR), in ruling GUJ/GAAR/R/2026/21 dated 29 May 2026, dealt with Isabgol seeds bought directly from farmers through Agricultural Produce Market Committee auctions.
The case involved Jigneshkumar Narayandas Patel, trading as Akshar Traders. The Gujarat ruling considered seeds supplied in their natural, raw and unprocessed form, without drying, freezing, crushing or other processing. The authority held that such seeds qualify as fresh Isabgol and are exempt from GST.
This ruling gave traders in Gujarat a basis for treating qualifying fresh seeds as Nil-rated goods.
But the wider trade chain soon raised questions about Isabgol coming from Rajasthan.
Some recent reports describe the dispute as a clash between Gujarat and Rajasthan rulings. However, the official GST Council record shows an important detail that changes the picture.
In the case of M/s Surendra Bucha, listed as RAJ/AAR/2026-27/03 and dated 27 July 2026, the Rajasthan Authority for Advance Ruling ruled that the Isabgol seeds in that case were fresh and exempt from GST. The official record says the authority accepted that no drying or processing had taken place. It also noted the Gujarat ruling in the Akshar Traders case as persuasive, though not legally binding under Section 103.
This means the Surendra Bucha ruling does not support the claim that Rajasthan’s AAR held those seeds to be dried and taxable at 5%. A separate tax analysis published in August had reported the opposite position, but the official GST Council record gives the ruling as Nil GST.
The wider problem for the trade remains. Traders are still seeking a single position that can be followed when Isabgol moves between Gujarat, Rajasthan and other producing areas.
The effect has been strongest in Unjha, where trading activity has been disrupted for more than two weeks, according to recent reports. Auctions at the Unjha APMC were suspended as traders waited for greater certainty over the tax treatment of seed bought from farmers.
The Times of India reported that Unjha has about 65 processing units and handled around 1.9 lakh metric tonnes of Isabgol stock in the 2025-26 financial year. About 1.6 lakh tonnes came from Rajasthan, 15,400 tonnes from Gujarat and the rest from Madhya Pradesh. The annual value of Isabgol trade in Unjha was estimated at around Rs 5,000 crore.
The stoppage affects more than traders. Processing units need a steady supply of seed. Exporters need processed husk to meet orders. Farmers need buyers when their crop reaches the market.
Traders are also worried about possible future tax demands. If past transactions that were treated as exempt are later considered taxable, businesses could face GST demands along with interest and penalties.
Isabgol, also known as psyllium, is a major agricultural and export product in western India. Its husk is widely used in food and pharmaceutical products because it is a source of dietary fibre.
Research published through the Indian Council of Agricultural Research says India has the largest share of global psyllium production, processing and exports. Gujarat and Rajasthan are major production and processing centres. The research also notes that leading exporters and processors are based around Sidhpur and Palanpur in Gujarat.
A Gujarat government-linked industry presentation says about 90% of India’s Isabgol is processed in Gujarat. It also records a rise in Gujarat’s psyllium production from 6,817 tonnes in 2018-19 to 12,952 tonnes in 2022-23. Unjha APMC receipts rose from 65,413 tonnes in 2018-19 to 87,052 tonnes in 2022-23.
The industry is strongly export-led. The Isabgol Processors Association says around 90% of finished Isabgol husk is exported and about 10% is sold in India with 5% GST. It also says about 70% of annual seed purchases take place between April and June, while exports continue throughout the year.
That timing makes a long trading stoppage particularly difficult for processors and exporters.
The association has also raised the issue of input tax credit. If GST is charged on seed purchases that the industry believes should be exempt, processors may have to carry the tax cost until the credit can be used or refunded.
For an export-heavy industry, this can tie up working capital. It can also make buying decisions harder when traders are unsure which tax rate should appear on invoices.
The National Commodity and Derivatives Exchange (NCDEX) also lists Isabgol seed futures with the basis price set ex-warehouse Unjha, showing the importance of the Gujarat market in organised trading of the commodity.
The Isabgol Processors Association has therefore asked the GST Council, Ministry of Finance, CBIC and Tax Research Unit to issue a clear national position on the classification of naturally obtained Isabgol seeds.
The association wants seeds bought directly from farmers and supplied without deliberate or machine-based drying to be clearly treated as fresh, where the facts meet that description.
For farmers, traders, processors and exporters, the main issue now is certainty. A common rule would reduce the risk of different tax treatment as the same agricultural commodity moves across state borders and would give businesses a clearer basis for buying, selling and processing Isabgol.
