Ministry Reports Comprehensive Tax Concessions for Cooperatives: MAT Cut to 15%, Manufacturing Rate Slashed, TDS Threshold Tripled

The Ministry of Cooperation has disclosed a ten point tax reliefs for cooperative societies, including a reduction in Minimum Alternate Tax (MAT) from 18.5% to 15%, a flat 15% tax rate for new manufacturing cooperatives, tripled TDS threshold to ₹3 crore, molasses GST slashed from 28% to 5%, and ₹10,000 crore relief for sugar cooperatives, the Government stated in Parliament on December 2, 2025.

Parliamentary Disclosure

Responding to Unstarred Question No. 333 in the Lok Sabha, Union Minister of Cooperation Shri Amit Shah detailed fiscal concessions for the cooperative sector. Dr. Nishikant Dubey's question sought clarification on GST exemption demands and financial assistance extended to cooperatives.

Minister Shah informed the House that while GST proposals are examined by the GST Council, the Government has implemented numerous tax benefits for cooperatives:

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1. MAT Cut: The Minimum Alternate Tax for cooperatives has been reduced from 18.5% to 15%, establishing parity with corporate entities. This 3.5 percentage point reduction enhances capital availability for member benefits and reinvestment.

2. Surcharge Reduced: The surcharge for cooperative societies earning between ₹1-10 crore has been cut from 12% to 7%, reducing the effective tax burden by 5 percentage points.

3. Manufacturing Rate Slashed: New manufacturing cooperatives that commenced operations by March 31, 2024, benefit from a flat tax rate of 15%, compared to the previous structure of up to 30% plus surcharge representing an effective 50% tax reduction.

4. Cash Transaction Relief Under Section 269ST: Cash transactions below ₹2 lakh with distributors in a single day will be treated separately and will not attract income tax penalties under Section 269ST.

5. PACS Transaction Limits: Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) received a tenfold increase in transaction thresholds cash deposits, payments, loans, and repayments enhanced from ₹20,000 to ₹2 lakh per member.

6. TDS Threshold Tripled: Cash Withdrawal Limit Now ₹3 Crore: The annual cash withdrawal limit without tax deduction at source has been tripled from ₹1 crore to ₹3 crore, improving operational liquidity for cooperatives.

7. Income Tax Relief for Sugar Mills: Through Finance Act 2015, Section 36(1)(xvii) provides deduction for expenditure on additional payments to sugarcane farmers, effective from April 1, 2016.

8. ₹10,000 Crore Relief: The Finance Act 2023 amended Section 155 of the Income Tax Act,1961, enabling Cooperative Sugar Mills to claim payments made to sugarcane farmers prior to assessment year 2016-17 as expenditure. The Central Board of Direct Taxes issued Circular No. 14 of 2023 establishing a Standard Operating Procedure, providing an expected relief of approximately ₹10,000 crore.

9. Molasses GST Slashed: GST on molasses, a key byproduct sold to distilleries for ethanol production has been reduced from 28% to 5%, enabling cooperative sugar mills to earn higher margins.

Tax Relief Impact:

Financial Impact:

• Medium-sized cooperative (₹5 crore income): -₹25 lakh annual tax savings
• New manufacturing cooperative (₹10 crore profit): ₹1.86 crore annual tax savings
• Sugar cooperatives: ₹10,000 crore one-time relief + ₹800-1,000 crore annual molasses GST benefit

GST Exemption Remains Unresolved

Minister Shah acknowledged receiving requests for GST exemption on cooperative products but provided no decision, stating that "proposals related to GST are examined by the GST Council (a constitutional body)." The molasses GST reduction represents the only GST concession granted, likely serving dual objectives supporting sugar cooperatives while incentivizing ethanol production.

Financial Assistance Beyond Tax Relief

PACS Computerization: ₹2,925.39 crore approved for digitizing 79,630 PACS across 31 States/UTs, with ₹900.49 crore released and 60,494 PACS onboarded.

Top 5 States by PACS Sanctioned:

ARDB Digitization: ₹9.84 crore released to 10 States for computerizing 1,851 Agriculture and Rural Development Banks.

Sugar Mill Loan Scheme: ₹10,000 crore facility through NCDC, with ₹10,005 crore released to 56 Cooperative Sugar Mills for ethanol plants and working capital.

NCDC Financial Support: ₹4,67,455.66 crore disbursed cumulatively as of November 25, 2025, with ₹95,182.88 crore in FY 2024-25, the highest annual disbursement in NCDC's history.

Conclusion

The tax package marks the overhaul of India's cooperative sector fiscal relief in more than ten years, with a cut in MAT to 15%, reduction of the Manufacturing rate to 15%, an increase of the TDS Threshold from ₹1 crore to ₹3 crore;, reduction in the GST charged on molasses from 12% to only 5%, among others.

While the package provides targeted relief in the form of direct tax concessions, the absence of any comprehensive GST exemption, which was a peculiar demand for many cooperatives, shows that a more generalised relief from indirect taxation and GST, is not possible under the structure of the current GST Council's consensus building process.

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