9/21/21, 6:40 PM Agricultural Produce Under GST Regime

Agricultural Produce Under GST Regime

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Relating to Services & Classification of Goods under the definition of agriculture produce.

India is an agricultural country. Therefore, the Government has been allotting substantial portion of budgetary expenditure for the development of the agricultural sectors
and besides play significant role to provide tax exemptions and tax benefits to the cultivators in agricultural sector for the growth as well as economic development of the
country. Here we try to focuses on taxability in relation to agricultural produce & classification of goods under the definition of agriculture produce, in accordance with
notifications, circulars, advance rulings (AAR under GST) & ruling from Apex Courts & High Courts in the erstwhile provision of Service Tax law and the provision has been
incorporated under GST law.

Definition “agricultural produce” in the GST regime

The definition of “agricultural produce” has not been provided in CGST Act; rather the term “agriculturist” has been defined under sub-section (7) of Section 2 of the
CGST Act, 2017, means an individual or a Hindu Undivided Family who undertakes cultivation of land –

(a) by own labour, or

(b) by the labour of family, or

(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

However, the term “agricultural produce” has been defined vide Notification No. 11/2017-C.T. (Rate) and 12/2017-C.T. (Rate), both dated 28-6-2017 and the relevant
portion is reproduced as under :

“agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel,
raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer
which does not alter its essential characteristics but makes it marketable for primary market.

In light of the aforesaid definition any products in order to become an agricultural produce having the following criteria :

(i)  Any produce out of cultivation of plants and rearing of all life forms of animals;

(ii) Such produce does not require any further processing and if any processing shall be carried by producer or cultivator;

(iii) the said processing does not alter the essential characteristics of such produce;

(iv) the requirement of such initial processing is essential to make the produce marketable at the primary stage of marketing.

Some of the Agriculture Produces, which were produced by the cultivators after some or minor processing, without changing its characteristics, termed outside the
definition of the “agricultural produce” by the Authority of Advance Ruling under GST. Such as Fennel (Saunf), Cumin Seeds (Jeera), Mustard Seed (Sarson), Dry
tamarind (Imli), Arjun Chaal, Gum (Gond), Turmeric (Haldi), Groundnuts (Mungfali), Coconut (Copra Gola), Dry Peas (Sukha Matar) Pulses, Rice etc.

Reasoning behind the above are, that the use of some specialized machine or equipment/plants or certain processing (as is not usually done by a cultivator or producer at
farm level), leading to consideration value addition, specific time consuming process, loses its essential characteristics, process done by skilled labour etc. lead to the fall
outside the definition of the “agricultural produce”.

It is pertinent to mention that job working or any process or services relating to agriculture or agricultural produce that was specified in the negative list of services and was
exempted from the payment of Service Tax under pre-GST regime but now it is taxable in the GST regime.

Even it is contradictory to definition of agricultural produce as provided in the GST law. Without processing of paddy into rice cannot be marketable hence job working of
paddy is primary marketing activities which makes agricultural produce i.e. paddy marketable. Further, the paddy cannot directly satisfy the requirement of consumer so
there is need of processing of paddy into rice by the cultivators. Since every farmers having no facility or not owned machine for processing paddy into rice, so they carry
out processing through Rice Miller and the services provided by Rice Miller should not be charged with GST as prescribed in the GST law. Alternatively, can we said that
when paddy processed into rice by cultivators by own machine then services are not liable to GST but when get it done through Rice Miller is taxable. So it is a
matter of discussion and arguable issue. If this provision of law will continue it will create litigation in future which needs further clarification by GST Council.

It is also a well settled law, held in various celebrated cases like M/s. D.S. Bist & Sons, Nainital – 1979 (004) SCC – 0741 that “It should be remembered that almost
every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his farm or elsewhere. In order to bring them to a
condition of non-perishability and to make them transportable and marketable, some minimal process is necessary to be applied to many varieties of agricultural
produce…But, there may be some other kinds of agricultural produce which require some more processing to make it marketable. In the case of such a commodity
what one to judge is to find out whether in relation to that agricultural produce the process applied was minimal or was it so cumbersome or long-drawn that
either, in common parlance or in the market, or even otherwise, anybody would not treat the produce as an agricultural produce…….

In Sterling Foods v. State of Karnataka, (1986) 26 E.L.T. 3 (S.C.), raw shrimps/prawns /lobsters after various processes became fit for human consumption. Prior
to such processing, they could not be used as articles of food. However, the aforesaid processes did not lead to a finding that there was manufacture inasmuch as
shrimps/prawns/lobsters identity continued as such even after the aforesaid processes.

In Crane Betel Nut Powder Works v. Commissioner, 2007 (210) E.L.T. 171 (S.C.), whole betel nuts could not be consumed by human beings. It is only after a
process of cutting them into smaller pieces and sweetening them with oil that they become fit for human consumption. It was held that the aforesaid process
would not amount to manufacture as betel nuts continued to be the same even after the aforesaid process resulting in no transformation of the commodity in
question.

Additions made to the article to preserve it or increase its shelf life are to be found in Tungabhadra Industries Ltd. v. CTO, (1961) 2 SCR 14 and M/s. Maruti Suzuki India
Ltd. v. CCE, 2015 (318) E.L.T. 353 (S.C.). In the Tungabhadra case, it was held that hydrogenated oil continued to be groundnut oil despite there being an intermolecular
change in the content of the substance of the oil due to hydrogenation. It was held that oil made from groundnut continued as such despite the hardening process of
hydrogenation. In its essential character, it was held that such hydrogenated oil continued to be groundnut oil. The process of hydrogenation only increased
the shelf life of the said oil.

When a finished product cannot conveniently be used in the form in which it happens to be, and it is required to be changed into various shapes and sizes so
that it can conveniently be used, no transformation takes place if the character and the end use of the first product continue to be the same. An illustration of
this principle is brought out by the judgment in CCE, New Delhi v. S.R. Tissues, 2005 (186) E.L.T. 385 (S.C.). On facts, in the said case, jumbo rolls of tissue paper were

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cut into various shapes and sizes so that they could be used as table napkins, facial tissues and toilet rolls. This Court held that there was no manufacture as the character
and the end use of the tissue paper in the jumbo roll and the tissue paper in the table napkin, facial tissue and toilet roll remains the same.

But, for the sake of arguments or who do not wish to go for litigations in GST, have to understand the term “agricultural produce”.

Taxability of Agricultural Produce in the GST regime

In view of the Notification No.2/2017-Central Tax (Rate) most of the items related to agricultural produce or of the said category has been classified under the goods
listed from Sl. Nos. 1 to 137 of Schedule of Goods Rates to Chapter Heading Nos. 101 to 8201 has been declared as Nil-rated. This clearly implies that produce out of
cultivation or produced by agriculturist is exempted from tax.

Some major items we try to specify herein below, that these goods were sold as Nil rated under GST but it does not mean that all these goods come under the
definition of agriculture produce in relation to the support services under the GST, which we discuss later on.

List of some goods with HSN Code.

Leguminous vegetables, shelled or unshelled, fresh or chilled : 0708 (Not Pulses),

Dried vegetables, whole, cut, sliced, broken or in powder, but not further prepared: 0712.
Dried leguminous vegetables, shelled, whether or not skinned or split : 0713 (form of Pulses),
Wheat and meslin :1001,
Maize (corn) : 1005,
Rice : 1006,
Soya beans, whether or not broken, of seed quality :1201,
Other oil seeds and oleaginous fruits (i.e. Palm nuts and kernels, cotton seeds, Castor oil seeds, Sesamum seeds, Mustard seeds, Saffower (Carthamus tinctorius)
seeds, Melon seeds, Poppy seeds, Ajams, Mango kernel, Niger seed, Kokam) whether or not broken, of seed quality: 1207.

Similarly, the rate of Services at Sr. No. 24 (Chapter Heading No. 9986) vide Notification No. 11/2017-C.T. (Rate) support services to agriculture sector were prescribed
and explanatory note

(i) Support services to agriculture, forestry, fishing, animal husbandry.

Explanation. – “Support services to agriculture, forestry, fishing, animal husbandry” mean –

(i) Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or
agricultural produce by way of –

(a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing

(b) supply of farm labour;

(c)   processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing,
sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only
marketable for the primary market;

(d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(e) loading, unloading, packing, storage or warehousing of agricultural produce;

(f) agricultural extension services;

(g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural
produce.

(ii) Services by way of pre-conditioning, precooling, ripening, waxing,    retail packing, labelling of fruits and vegetables which do not change or alter the essential
characteristics of the said fruits or vegetables.

(iii) Carrying out an intermediate production process as job work in relation    to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for
food, fiber, fuel, raw material or other similar products or agricultural produce.

Here, we can see in every stretch that there is a word mentioned “agriculture produce”. So, we have to specifically go with definition of “agriculture produce” in relation to
goods which come under the said definition and which is not, because on the basis of the classification of the goods, the taxability of services in relation to the agriculture
sector is determined.

Like ;

Commission Agent Services,

Storage & Warehousing Services,
Job Work Services,
Loading & Un-loading Services,
Transport Services (GTA),
Renting out Agro Based Machinery or vacant land.

Further, herein we try our readers and clients to understand the meaning of the definition “agriculture produce” with Advance Rulings under the GST and some
contradictory judgments by the Indian Courts.

Commission Agent Services

One is known by a prevalent name of “Arhatia”, and there were mainly two types of Arhatia known as “Kaccha Arhatia” and the other is a “Pucca Arhatia”. And, this term
“Arhatia” is duly defined in GST as “agent” under section 2 (5) of the GST Act, 2017. (herein after called as act)

An analysis of distinction between the two shall bring more clarity in understanding the controversy posed before us.

Issuance of Invoice : Kaccha Arhatia are those persons who are acting as commission agents but will not issue an invoice for the supply by his name or his own
firm, whereas Pucca Arhatia is having liberty to issue an invoice.

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Control over the Goods : The Kachha Arhatia unlike the Pacca Arhatia, does not have any dominion over the goods.
Personal Interest : The Kachha Arhatia has no personal interest of his own when he enters into a transaction and his interest is limited to the commission agent’s
charges and certain out of pocket expenses whereas a Pacca Arhatia has a personal interest of his own when he enters into a transaction in as much as he can also
supply his own goods to the principal.
Payments of Goods : Kachha Arhatia brings a privity contract between his constituent and the third at each becomes liable to the other, The Pacca Arhatia, on the
other hand, self-liable upon the contract not only to the third party.

No, GST registration required for commission agent supplying exempted agricultural produce on a commission basis.

As per provisions contained under the act , a commission agent who is making supplies on behalf of such agriculturist, who is not a taxable person, is not liable for
compulsory registration under clause (vii) of section 24 of the CGST/HGST Act, 2017. However, if the aggregate turnover of supply (services or goods) of exempted as
well as taxable goods by commission agents (Kachha Arhatia) exceeds the threshold limit, such commission agents shall be liable for registration as per section 22 (1) of
CGST/HGST Act, 2017. (In re M/s Bhaktawar Mal Kamra & Sons (GST AAR Haryana).

An agent storing fresh turmeric in its godown and selling to the traders. On invoice, the farmer mentioned as seller in invoice and same was signed by farmer, agent and
the buyer. Buyer pays agent who after deducting his commission for services rendered passes on sale proceeds to farmer. This type of activities covered by definition of
‘agent’ and included commission agents who carries on business of supply or receipt of goods or services or both on behalf of another. These type of services by agent to
farmer, generally provided in relation to agricultural produce in primary market.

Hence, these services rendered by the commission agent to the farmer and earned income by way of commission and storage charges will be exempted under the act,
and knowing as by providing support services for agricultural produce and same classifiable as ‘support service to agriculture’ under Services Accounting Code (SAC)
Heading 9986.{ IN RE : ERODE MANJAL VANIGARKAL MATRUM KIDANGU URIMAIYALARGAL SANGAM}.

Whereas, Dry Turmeric (Haldi), produce brought to primary market (mandis) after harvesting as fresh green/raw turmeric sold by agents/farmers/cultivators, But a person
known as trader or stockist after drying and polishing being a specialized process not usually carried out by cultivator which converts them into dry haldi, changing the
essential characteristic leading to considerable value addition keep Dry Turmeric (Haldi) for cold storage. Therefore, Dry Turmeric (Haldi), is not classified as goods as
agriculture produce and same do not fall under the definition of ‘Agricultural Produce’. {IN RE : SARDAR MAL COLD STORAGE & ICE FACTORY.}

Likewise, same test was applied in Tungabhadra case (supra) and in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food
Packers, (1980) 3 SCR 1271 = 1980 (6) E.L.T. 343 (S.C.). In that case, the process undertaken was to remove the inedible portions of Pineapple together with its outer
cover and then slice such Pineapple and can the same after adding sugar as a preservative. It is important to note that the cans were sealed under high temperature and
then put into boiling water for sterilization. It was held that there was no manufacture inasmuch as the essential character of the Pineapple had not changed. The Court
said “Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing
may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each
process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where
commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct Article that a manufacture can be said to take place.
Where there is no essential difference in identity between the original commodity and the processed Article it is not possible to say that one commodity has
been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.”

Commission Agent services provided being a registered person to principal for sale of dry chillies (agricultural produce) on behalf of principal are exempted under
Notification No. 12/2017-C.T. (Rate).  Dry chillies are classified under the term of “agricultural produce”. Therefore, the income earned on the services was
attract NIL GST. Because this product produced out of plants and used for food or as raw materials. This product obtained by drying chillies to make it marketable for the
primary market and this process not altering its essential characteristics. {IN RE : MORIGERI TRADERS COMMISSION AGENTS}.

Therefore, the services rendered by the registered person as commission agent in relation to sale on such good which does not qualify the term “agriculture
produce”, same was taxable under the act. Likewise, Commission earned by a registered person on sale of Pulses, Rice etc (because Pulses & Rice are also
not termed as agriculture produce under the GST) is also taxable in the hand of the registered person and liable to issue an invoice for Supply of Services with
tax @ 18%.

Storage & Warehousing Services

The services for storage of “agricultural produce” falls under the SAC 9986. These services is depends upon the product specific and not a person specific. Mean
thereby, exemption from GST on said produce is wholly depends upon the classification of the goods and services not the owner of the Storage & Warehousing and it can
be applicable for both farmers as well as traders.{IN REF : SSSVK COLD STORAGE PVT. LTD.}

Mean thereby, there should be a component of services also along with place of storage of product then only exemption is allowed. To clarify this issue, lets take examples:
in case of Food Corporation of India (FCI) that the service provided by godown owner in case of lease with services, where the godown owner, besides leading the
warehouse, undertakes to carry out activities of storage and preservation of stored food grains etc, is the service provided of storage and warehousing of agricultural
produce and then only said services is exempt, only space provided for storage of product does not qualify the exemption.

Although, the Rice is not an agriculture produce but for Rice, there is specific entry in the schedule at no. 24 under the heading of 9967 or 9985 of the Notification
No.12/2017 for exemption on supply of services by way of loading, unloading, packing, storage or warehousing of rice. But, same like services were not exempted in
relation to the product pulses.

Services provided by the Central Warehousing Corporation as storage and agreed for receiving the charges for space only for storage of food commodities. The
agreement between parties shows that services provided by the Central Warehousing Corporation to assessee actually renting of immovable property and not storage
service of goods like food commodities, which were exempted because there should be some services provided by the supplier along with space for having exemption,
which is not seen through an agreement between the parties. Hence, liable to CGST @ 9% under Serial No. 16 of Notification No. 11/2017-C.T. (Rate tax) {IN REF :
KARNATAKA FOOD &CIVIL SUPPLIES CORP. & IN REF: RISHI SHIPPING}

A Private Entrepreneur providing services in relation to Godowns for FCI, which include the services of leasing, maintenance and operation thereof, these includes
providing services of storage, preservation and warehousing of wheat for FCI. Although, these type of service is qualifying the test of ‘Storage and Warehousing Services’
which is an exempt supply for agriculture produce and.

But, from the terms of agreement between the parties, it reveals that lessee is at liberty to store any goods of other third party also. Therefore, the supplier is providing two
services, i.e., support services in relation to agricultural produce as well as Real Estate Services. Since both these services can be provided independent of each other,
these are not naturally bundled and hence are mixed supply. The supplier is liable to pay highest of two rates applicable to these two supplies viz. 18% (CGST 9% + SGST
9%] applicable to Real Estate Service under SAC 997212 – Section 9 of Central Goods and Services Tax Act, 2017.

Job Work Services.

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A person/firm is engaged into the activities of cleaning of the various agricultural produce which are brought to them by the farmers or traders. The agriculture produce
contains dust particles, certain small pieces of stones, dust, mud and other impurities etc. The process is having cleaning plant and they remove the various impurities but
do not change the essential character of the agricultural produce but make the product marketable for the primary market. Held that the activity of the appellant is not
exempted under the relevant Notifications. The GST Authority held that the activity of mechanized cleaning by the appellant does not fall under intermediate production
process as job work in relation to cultivation of plants. Intermediate process as job work in relation to cultivation of plants are operations like harvesting, threshing, plant
protection, testing and supply of farm labor, etc., carried out at agricultural farm.

There are three ingredients of the Entry Nos. 24(i)(i)(c) and 54(c) ibid.

(i) Stated processes should be carried out an agricultural farm;

(ii) Stated processes should be of such nature which does not alter the essential characteristics of the agricultural produce;

(iii) Stated processes should be of such nature which make the produce marketable for the primary market.

A process must satisfy all the three conditions before being declared as the process exempted from GST vide the above said Entry Nos. 24(i)(i)(c) and 54(c) ibid under the
above Notification Nos. 11/2017-Central Tax (Rate) and 12/2017-Central Tax (Rate).

Coming to the first condition, we find that the impugned process is not being carried out at an Agricultural Farm. It is being carried out mechanically in the factory away
from the Agricultural Farm. Coming to the second condition, we find that the process of cleaning does not alter the essential characteristics of the agricultural produce.
Coming to the third condition, we find that the process of cleaning undertaken at the end of the appellant make the produces like Saunf (Fennel), Dhaniya (Coriander),
Jeera (Cumin seeds) marketable for the secondary market. After this cleaning these produces comes to the stage where these can be directly consumed by the general
public. While Saunf (Fennel), Dhaniya (Coriander), Jeera (Cumin seeds) which farmer brings into the primary market is not suitable for direct consumption by the general
public. There is a vast difference between the type of cleaning undertaken at the farm level by the farmer and that undertaken at the factory by specialized machines.
In nutshell, the impugned process when undertaken at the factory level upgrade the marketability of the produce to the level of the secondary market. The exemption
notifications do not envisage such a refinement on the produce. Thus we find that the impugned process succeeds only on one count while it failed miserably on other two
counts. {In Re : ‘Rara Udyog’ }

There is clarification on taxability of custom milling of paddy also, by vide Circular No. 19/19/2017-GST New Delhi, 20th November 2017.

Representations have been received seeking clarification on whether custom milling of paddy by Rice millers for Civil Supplies Corporation is liable to GST or is exempted
under S. No 55 of Notification 12/2017 – Central Tax (Rate) dated 28th June 2017.

1. The matter has been examined. S. No 55 of Notification 12/2017- Central Tax (Rate) exempts carrying out an intermediate production process as job work in relation
to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural
produce. Agricultural produce has been defined in the notification to mean, any produce out of cultivation of plants and rearing of all life forms of animals, except the
rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by
a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Job work has been defined under section 2 (68) of the
CGST Act to mean any treatment or process undertaken by a person on goods belonging to another registered person. Further, under Schedule II (para 3) of the CGST
Act, any treatment or process which is applied to another person‟s goods is a supply of service.

2. Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a process carried out after the process of cultivation is over and paddy
has been harvested. Further, processing of paddy into rice is not usually carried out by cultivators but by rice millers. Milling of paddy into rice also changes its essential
characteristics. Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to cultivation of plants for food, fibre or other
similar products or agricultural produce.

3. In view of the above, it is clarified that milling of paddy into rice is not eligible for exemption under S. No 55 of Notification 12/2017 – Central Tax (Rate) dated 28th
June 2017 and corresponding notifications issued under IGST and UTGST Acts. 5. GST rate on services by way of job work in relation to all food and food products falling
under Chapters 1 to 22 has been reduced from 18% to5% vide notification No. 31/2017-CT(R) [notification No. 11/2017-CT (Rate) dated 28.6.17, S.No. 26 refers].
Therefore, it is hereby clarified that milling of paddy into rice on job work basis, is liable to GST at the rate of 5%, on the processing charges (and not on the entire value of
rice).

The above circular is totally based on the judgement held by the Apex Court:

It was necessary in view of the fact that admittedly paddy and rice are different commodities. It has been held to be so in a decision of the Court in Ganesh
Trading Company, Karnal v. State of Haryana & Anr. [(1974) 3 SCC 620] in the following words :

“Now, the question for our decision is whether it could be said that when paddy was dehusked and rice produced, its identity remained. It was true that rice
was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as
paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice
produced, there has been a change in the identity of the goods.”

In another case held by the Apex Court in M/s. Satnam Overseas Ltd. v. Commissioner of Central Excise, New Delhi (Civil Appeal No. 8958 of 2003), 2003 (151)
E.L.T. 401 (S.C.) it was held that as the essential character of the product had not changed, there would be no manufacture. In that case, the product was a
combination of raw rice, dehydrated vegetables and spices in the name of rice and spice. It was held that the said product in its primary and essential
character was sold in the market as rice only, despite the addition of dehydrated vegetables and certain spices. Further, the rice remained in raw form and in
order to make it edible it had to be cooked like any other cereal.

Pulses commonly known as dal are obtained after dehusking or splitting or both. The process of de-husking or splitting is usually not carried out by farmers or at farm level
but by the pulse millers. Therefore pulses (dehusked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in
the definition of agricultural produce. {Circular 16/16/2017, dt. 15, November,2017.

Loading & Un-loading Services

These services are exempted only in the relation to the products only, which comes under the definition of “agriculture produce”. So, we have to go carefully with term and
product on which we can avail exemption.

However, the Rice is not an agriculture producet but for Rice, there is specific entry in the schedule at no. 24 under the heading of 9967 or 9985 of the Notification
No.12/2017 for exemption on supply of services by way of loading, unloading, packing, storage or warehousing of rice. But, same like services was not exempted in
relation to the product called pulses.

Transport Services (GTA)

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In this, we will discuss the services availed/charges paid by the recipient for transportation of goods.

Services provided by a goods transport agency, by way of transport in a goods carriage of –

(a) agricultural produce;

(b) ……….;

(c) ………..;

(d) milk, salt and food grain including flour, pulses and rice;

(e) ..……..;

Herein above, we can see that apart from the products called agriculture produce, we can see some more entries in the Notification No.12/2017 dt. 28.06.2017 vide entry
no. 21 under the heading of 9965 or 99667 providing exemption in transportation of  services, in products called food grains but they don’t termed as agriculture produce.

Goods Transport Agency services – Transportation of cotton seed oil cake (Khal) – Taxability under RCM – Applicant engaged in trading of said item, pleading that since
transportation of foodgrains, milk and agricultural produce are exempted from GST, transport of his product is also exempt – HELD : Plea of applicant purely hypothetical –
Liability of GST on GTA services under RCM and exemption from GST on transportation services, are determined by relevant notifications – Said item not exempt in
General under GST Act nor its transportation exempt from GST under Notification No. 12/2017-C.T. (Rate) – Further, in terms of Notification No. 13/2017-C.T.,
applicant’s liability under RCM clearly made out as recipient of GTA services – GST payable – Section 9 of Central Goods and Services Tax Act, 2017.{IN  REF: SANJAY
KUMAR}

From above said advance ruling we can understand that those goods on which GST is not applicable or the goods mentioned in the Notification No.2/2017-Central Tax
(Rate), in which most of the items related to agricultural produce or of the said category has been classified under the goods listed from Sl. Nos. 1 to 137 of Schedule of
Goods Rates to Chapter Heading Nos. 101 to 8201 has been declared as Nil-rated or clearly implies that produce out of cultivation or produced by agriculturist is
exempted from tax, then we can avail the benefit for exemption on the services relating to the transportation of the same good/ product.

Renting out Agro Based Machinery or vacant land.

Lease rent paid to Government on land used for agricultural purpose. Grant of lease constituted ‘supply’ for a ‘consideration’ and covered under “supply of services”.
Vacant land given by State on lease rent converted by assessee into coffee plantation, form of agriculture produce.  Classifiable under HSN 9986 – Lease rent collected
exempted in terms of Notification No. 12/2017-C.T. (Rate) and lease rent received in relation to agricultural activities also exempted – Assessee entitled to GST
exemption. {IN RE : COCHIN PLANTATIONS LTD.} As per Notification No. 12/2017-Central Tax (Rate)/SRO. No. 371/2017 Government has exempted intra-state
supply of services covered under Heading 9986. As per this notification services relating to cultivation of plants or agricultural produce by way of ‘vacant land with or
without a structure incidental to its use’ is exempted from tax liability.

Conclusion:

Thus imposing GST on agricultural produce as well as Services related to agricultural produce is unjustified and it is an arguable issue to protect the interest of the
cultivators in the country. In the name of good and simple tax to neutralize cascading effects of tax, imposing a fresh tax liability on agricultural produce and services
related to agricultural produce is unwarranted and illegal. At this juncture there is need of immediate intervention by the GST Council to issue suitable clarification to avoid
unnecessary disputes and litigations in the coming days.

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Author Bio

Name: DEEPAK GUPTA

Qualification: LL.B / Advocate

Company: DEJURE PARTNERS

Location: DELHI, New Delhi, IN

Member Since: 08 May 2020 | Total Posts: 1

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