A seemingly narrow question under GST – whether isabgol seed should be regarded as “fresh” or “dried” – has brought one of India’s most important agricultural trading ecosystems to a standstill.

For more than two weeks, auctions of isabgol, or psyllium seed, at the Unjha Agricultural Produce Market Committee (APMC) in Gujarat have remained suspended amid differing tax positions being encountered in Gujarat and Rajasthan. The immediate concern for traders is straightforward: if purchases presently treated as exempt are subsequently held liable to 5% GST, the resulting tax exposure could run into crores of rupees.

The dispute, however, is not merely about a 5% tax rate. It raises a larger issue concerning certainty and uniformity under GST, particularly where the same agricultural commodity moves through an interstate supply chain.

Why Isabgol Trade at Unjha Matters

Unjha is a major centre for the processing and trading of psyllium. According to industry estimates reported by The Times of India, approximately 65 processing units in Unjha handled around 1.9 lakh metric tonnes of stock in FY 2025-26. Of this, nearly 1.6 lakh metric tonnes originated from Rajasthan, while around 15,400 metric tonnes came from Gujarat. The annual value of the trade at Unjha is estimated at approximately ₹5,000 crore.

This explains why a difference in GST treatment between the two states can have consequences far beyond a classification dispute.

Farmers sell the crop, traders procure it through APMC auctions, processing units extract psyllium husk, and a substantial part of the finished product enters the export market. When uncertainty arises at the first stage of this chain, the effect travels through procurement, processing, working capital and export commitments.

With auctions suspended, processors face shortages of raw material, exporters face delays in meeting commitments and farmers encounter uncertainty at a time that also coincides with the sowing season.

What Does the GST Law Say on Isabgol?

The starting point is Heading 1211 of the Customs Tariff, which covers plants and parts of plants, including seeds and fruits, of a kind used primarily in perfumery, pharmacy or for similar purposes.

Under the present rate structure, Notification No. 9/2025-Central Tax (Rate), dated 17 September 2025, covers such goods under Heading 1211 when they are frozen or dried. Entry 71 of Schedule I attracts GST at 5%, comprising 2.5% CGST and 2.5% SGST.

On the other hand, Entry 87 of Notification No. 10/2025-Central Tax (Rate), also dated 17 September 2025, exempts goods under Heading 1211 when they are fresh or chilled.

The broad framework is therefore relatively clear:

Fresh or chilled isabgol seed — Nil GST.
Frozen or dried isabgol seed — 5% GST.

Indeed, CBIC’s GST rate FAQs have historically stated the same position: isabgol seeds fall under Heading 1211; fresh seeds attract Nil GST, while dried or frozen seeds attract 5%.

The difficulty lies not in the rates themselves, but in determining when an isabgol seed should legally be regarded as “fresh” and when it becomes “dried”.

Gujarat AAR: Raw and Unprocessed Isabgol Is ‘Fresh’

An important development came on 29 May 2026 when the Gujarat Authority for Advance Ruling delivered its decision in In re Jigneshkumar Narayandas Patel (Akshar Traders).

The applicant proposed to procure psyllium seeds directly from farmers through APMC auctions and supply them to processing units without undertaking drying, freezing, crushing or any other processing. The seeds were to remain in substantially the same condition in which they were procured.

The Gujarat AAR held that such psyllium seeds could be considered “fresh”.

A significant part of the Authority’s reasoning was that no artificial or intentional drying, dehydration, freezing or processing was undertaken. The seeds continued in their natural form from procurement until their subsequent supply to processing units. The Authority applied the principles concerning the distinction between fresh and dried produce discussed in Circular No. 169/19/2021-GST dated 6 October 2021.

Consequently, the AAR held that raw and unprocessed psyllium seeds procured through the APMC mechanism were covered by Entry 87 of Notification No. 10/2025 and were liable to Nil GST.

The Authority also considered an alternative argument that the product could be exempt as “goods of seed quality” under Entry 77 of Chapter 12. It did not accept that route, holding that the specific entry for products falling under Heading 1211 would prevail over the more general entry for goods of seed quality.

This distinction is important. The exemption was not granted merely because isabgol is an agricultural seed. It was granted because the product, on the stated facts, qualified specifically as fresh psyllium seed falling under Heading 1211.

Then Why Has the Market Still Come to a Halt?

The difficulty arises because the Gujarat ruling has not translated into uniform treatment across the supply chain.

Industry participants have reported a differing position in Rajasthan, where 5% GST is being associated with isabgol seed transactions that Gujarat traders consider to be supplies of fresh, exempt seed. This mismatch has become commercially significant because Rajasthan is the principal source of the raw material processed at Unjha.

A trader purchasing Rajasthan-origin material therefore faces an uncomfortable question: should the transaction be treated as exempt based on the nature of the commodity and the Gujarat AAR’s reasoning, or should 5% GST be factored in to protect against a future demand?

In tax matters, uncertainty can sometimes be more disruptive than the rate itself. A business can price a known tax cost. It is considerably more difficult to price the possibility that a transaction treated as exempt today may be challenged several months or years later along with interest and consequential exposure.

The Limitation of an Advance Ruling

This episode also highlights an important structural limitation of the advance ruling mechanism.

Under Section 103 of the CGST Act, an advance ruling is binding only on the applicant who sought the ruling and on the concerned or jurisdictional officer in respect of that applicant. It does not automatically become a binding ruling for every trader dealing in the same commodity across India.

Therefore, although the Gujarat AAR provides useful legal reasoning and persuasive guidance, it does not by itself eliminate the possibility of a different interpretation being adopted in another jurisdiction or in the case of another taxpayer.

This is precisely where an otherwise technical classification matter can turn into a broader policy problem.

GST was designed around the principle of a common national market. Where an identical commodity, moving in substantially the same condition, faces materially different tax treatment depending upon the state from which it is procured, the resulting uncertainty affects interstate trade itself.

‘Fresh’ Should Be Determined by the Product, Not Merely by Terminology

There is also a practical aspect that deserves attention.

Agricultural commodities do not always fit neatly within everyday descriptions such as “fresh” and “dry”. A seed may naturally lose moisture after harvesting and during storage without undergoing an industrial drying process. At the same time, the trade may colloquially describe a commodity as “dry” even though no deliberate drying or dehydration has taken place.

The Gujarat AAR’s reasoning therefore offers an important analytical distinction: the relevant inquiry should focus on the actual treatment of the goods.

Where isabgol seed is procured from farmers in its natural form and no artificial drying, dehydration, freezing or processing is undertaken, the case for treating it as fresh is materially different from a situation where the commodity has deliberately undergone a drying or preservation process.

Such a factual distinction is more workable than allowing the tax treatment to depend simply on commercial terminology.

Working Capital and Export Competitiveness Are Also at Stake

The issue assumes further significance because the isabgol industry is heavily export-oriented.

Even where GST paid on inputs may ultimately be available as credit or refundable in the case of zero-rated exports, the tax can remain blocked as working capital until the credit or refund is realised. Industry representatives had raised this concern even before the present dispute, pointing to substantial capital being locked up because processors were paying GST on seed purchases in order to avoid classification disputes.

For an export-oriented commodity operating on large volumes, the difference between an exempt procurement and a 5% taxable procurement is therefore not merely an accounting entry. It can materially influence liquidity, financing costs and competitiveness.

What the Industry Needs Now

The immediate requirement is not another state-specific interpretation, but a clear and uniform position capable of being followed across jurisdictions.

The legal framework already distinguishes fresh isabgol from dried or frozen isabgol. The Gujarat AAR has now provided detailed guidance on when natural and unprocessed psyllium seed can qualify as fresh. Yet the present disruption demonstrates that an interpretation limited to an individual advance ruling may not be sufficient for an interstate agricultural market.

Industry representatives have accordingly sought intervention at the Central Government and GST Council level. Public reporting as of mid-August 2026 indicates that traders are awaiting a uniform clarification before normal operations can fully resume.

A central clarification explaining the parameters for distinguishing natural, unprocessed isabgol seed from deliberately dried seed could considerably reduce the present uncertainty.

Conclusion

The Unjha situation is a useful reminder that GST certainty depends not only on prescribing tax rates, but also on ensuring consistent interpretation of the conditions attached to those rates.

On paper, the position appears simple: fresh isabgol is exempt and dried or frozen isabgol attracts 5% GST. In practice, however, the absence of a uniform understanding of what constitutes “fresh” has been sufficient to interrupt a ₹5,000-crore trading ecosystem.

The Gujarat AAR has provided a reasoned basis for treating natural, raw and unprocessed psyllium seed as fresh where no deliberate drying or processing takes place. The next step should be to ensure that similarly situated transactions receive consistent treatment across state borders.

For businesses, the larger lesson is equally important: where taxability depends upon the physical condition or processing of a commodity, documentation of procurement, storage and processing practices becomes critical. For policymakers, the present dispute underlines the need for clarification before a classification issue becomes a supply-chain issue.