In re M/s Deputy Conservator of Forests (GST AAR Karnataka)
Question 1. a. The applicant states that Karnataka Forest Department, under its sovereign functions, raises ‘plants’ of tree species, plants them in forest, waste & common lands. Over time, with the nurturing and management of the department, these plants grow up to become trees when they are harvested to yield timber, poles, billets, firewood, pulpwood, etc. which are raw material (for say carpentry works), fuel (firewood is burnt as fuel), and fibre (pulpwood is used as fibre for paper and rayon industry).
b. The task of harvest of these trees which grew from “plants” planted by the department is at times given to Government Corporation / Corporations. (That the National Forest Policy and the Hon’ble Supreme Court directions prohibit engagement of Contractors is a matter not germane to the case at hand). These Corporations –
i. Fell the trees that grew from the “plants” – Labour work
ii. Convert them, into timber, firewood, poles, etc so that they become marketable for the primary market – Labour work
iii. Load the marketable timber, firewood, etc in vehicles – Labour work
iv. Transport the marketable timber, firewood etc. by vehicles – Non Labour work
v. Unload the marketable timber, firewood etc. from vehicles – Labour work
vi. Stack the marketable timber, firewood etc. in government timber deports – Labour work
The applicant submitted that all of these, and some activities related to it (like clearing the roads, fire prevention, etc.) together are termed as an item of work called “logging”. The question arises is that, for this service of “logging” done by the Corporation and received by the Forest Department, what is the GST payable?
AAR held that The operations of “logging” as described in the application would attract tax under the Goods and Services Tax Acts and it is independent of the trees, whether planted by the Forest Department or which grew out of natural regeneration.
Question 2. In case the trees have grown from “plants” not planted by the Karnataka Forest Department, but that which grew by natural regeneration but were nurtured, managed and protected by the Karnataka Forest Department, does the same nil rate of SGST and CGST apply to them too? If not, what would be the rate? c) In case of sale of forest produce or any other goods belonging to Karnataka Forest Department, where the buyer is registered or is based in and transports the goods to outside the State of Karnataka, what should be charged under the CGST Act, 2017, (A) SGST and CGST, or (B) IGST? d) In case of sale of forest produce or any other goods belonging to Karnataka Forest Department, where the buyer is registered or is based outside the State of Karnataka, but uses the goods within the State of Karnataka, what should be charged under the CGST Act, 2017? (A) SGST and CGST, or (B) IGST?
The transaction described in the application in Issue No.2, is an intra-State supply and attracts CGST and SGST and is independent of where the goods are taken by the recipient after the supply is completed.
