Case Law Details
In re Shri Sai Pest Control (GST AAR Gujarat)
The applicant has claimed that they are providing service of fumigation to the custom bonded warehouse where in agri produce of export are stored. It means that all the such agri produce which are going to be exported before storing in bonded warehouse have been processed further by the exporter to make the said agri product to become exportable. Hence subsequent process on agri produce leading to value addition and further export to out of the country belong to secondary market, do not cover under the category of “Agricultural Produce” as defined in Notification. Further, the applicant in their application has not elaborated what types of the agri produce are stored in custom bonded warehouse. Therefore, during the course of Personal hearing it was requested to the applicant to submit the copy of agreement entered between them and customer so that it can be concluded that whether the only agri produce as defined in the definition of explanation 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.06.2017 are stored in custom bonded warehouse or otherwise. However, the applicant failed to submit copy of any agreement entered between them and their customer.
Accordingly, in view of the above discussion we are of the view that in the custom bonded warehouse agri produce stored for export do not cover under the definition given under explanation 2(d) of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Further, in absence of any facts on the records we are not in position to conclude that the custom bonded warehouse are used exclusively only for storage of agriculture produce and are not used for storage of non agriculture produce. We have further observed that applicant in his application has submitted that in the custom bonded warehouse imported agri produce are also stored. The imported produce has been procured from the farmers in the foreign and exported to India. Clearly, it is, whether processed in a mill, no longer in the domain of the primary market or at the farmer’s hand. Hence in view of the aforesaid discussion we concluded that the fumigation service provided by the applicant in custom bonded warehouse where in exported and imported agriculture produce are stored is not covered under Sl. No. 54(h) of the Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, therefore, applicant service is liable to GST.
we refer the relevant entry No. 420 of Annexure to the Notification No. 11/2017-CT (Rate) dated 28.06.2017 of SAC 99853 and same is produced as under :
| 420 | Group 99853 | Cleaning services | |
| 421 | 998531 | Disinfecting and exterminating services | |
| 422 | 998532 | Window cleaning services | |
| 423 | 998533 | General cleaning services | |
| 424 | 998534 | Specialised cleaning services for reservoirs and tanks | |
| 425 | 998535 | Sterilisation of objects or premises (operating rooms) | |
| 426 | 998536 | Furnace and chimney cleaning services | |
| 427 | 998537 | Exterior cleaning of buildings of all types | |
| 428 | 998538 | Cleaning of transportation equipment | |
| 429 | 998539 | Other cleaning services nowhere else classified |
Hence service of fumigation/pest control in warehouse provided by the applicant is merit classification under Service Accounting Code (SAC) 99853.
In view of the entry No 23(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 the rate of GST for the service of fumigation/pest control provided in a warehouse of agriculture produce would be 18 % i.e. {CGST 9% +SGST 9%}.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
BRIEF FACTS OF THE CASE:
M/s. Shri Sai Pest Control, Flat No.110/111/112/113, Jalaram Complex, Nr. Udwada Railway Station, Udwada, Valsad, Gujarat-396185 having a GSTIN : 24ACYFS2393E1ZO, is a company filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of Rs. 5,000/- each under the CGST Act and the GGST Act. 1440
2. M/s. Shri Sai Pest Control is providing service of pest control that completely fills an area with gaseous pesticides of fumigants to suffocate or poison the pests within. It is utilized for control of pests in Grain and produce and it is also used during the processing of goods to be imported or exported to prevent transfer of exotic organism. It is highly recommended in transportation of goods-importation and exportation of goods- fumigation is necessary requirements.
3. The applicant submitted that they are providing fumigation service to their clients as per their requirements in factory premises, in warehouse premises may be stored Agri and non agri products. Further, normally Fumigation Services chargeable to GST @18%.
4. The applicant submitted that their main issue is that Fumigation Services provided to a warehouse of Agricultural Produce is totally exempt under Entry No. 54 of Not. No. 12/2017-CT (Rate) dated 28.06.2017.
5. The applicant submitted that they have order from their client to Fumigation Services in a bonded/ customs warehouse of Food Grain, Pulses and similar to the agri products- whether such fumigation services are chargeable under GST or exempt.
6. The applicant submitted that they sought clarification about the taxability or exempt of such fumigation services provided in a warehouse of Agriculture Produce. Whether such Agri produce stored in a warehouse may be imported or Exported produced.
7. Accordingly, the applicant sought the Advance Ruling on the following questions :
1. Fumigation service provided in a warehouse of agriculture produce is taxable or Exempt vide Entry No. 54 of Not. No. 12/2017-CT (Rate) dated 28.06.2017?
2. Classification of Fumigation of such services under Service Accounting code 998531 is correct.
3. Determination of Tax liability to pay tax on such service.
Applicant’s interpretation of law and/or facts
8. The applicant submitted that Fumigation Service in a warehouse of Agriculture Produce like food grain, pulses and similar agriculture produced, whether such agriculture produced stored in a warehouse is imported or for export purposes is totally exempt under Entry No. 54 of Not. No. 12/2017-Ct (Rate) Dated 28.06.2017. Further on plain reading of entry 54 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 service provided to warehouse of agri produce is exempted.
Personal Hearing
9. Personal hearing in the matter was held on 24.09.2020. Authorised representative of the company appeared on behalf of the applicant and reiterated the submission made in the Application.
DISCUSSION & FINDINGS
10. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative. We have also considered the issues involved on which Advance Ruling is sought by the applicant.
11. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the GGST Act.
12. The main issue here is to decide whether the service of fumigation provided in a warehouse of agriculture produce is taxable or Exempt vide Entry No. 54 of Not. No. 12/2017-CT (Rate) dated 28.06.2017. To decide whether the service of fumigation carried out by the applicant is exempted or taxable we have to look into the nature of activity carried out by the applicant.
13. We observe that the applicant is providing service of pest control that completely fills an area with gaseous pesticides of fumigants to suffocate or poison the pests within the area of fumigation. The fumigation is utilized for control of pests in Grain and produce and it is also used during the processing of goods to be imported or exported to prevent transfer of exotic organism. The applicant provides fumigation service to their clients as per their requirements in factory premises, in warehouse premises may be stored Agri and non agri products. The applicant further submitted that they have order from their client to Fumigation Services in a bonded/ customs warehouse of Food Grain, Pulses and similar to the agri products and such Agri produce stored in a warehouse may be imported or Exported produced.
14. To decide whether the fumigation services provided to the bonded custom warehouse wherein imported or exported agri produce stored are eligible for exemption, we refer the entry No. 54 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. The relevant Entry No. 54 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 as amended vide Notification No. 02/2018-CT (Rate) dated 25.01.2018 is reproduced as under:
| 54 | Heading 9986 | 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. (h) services by way of fumigation in a warehouse of agricultural produce. |
Nil | Nil |
As per the Entry No. 54 (h) of Notification No. 12/2017-CT (Rate) dated 28.06.2017 as amended Services by way of fumigation in a warehouse of agriculture produce are not liable to Goods and Service Tax. It means that service of fumigation provided to agriculture produces stored in a warehouse are exempted from payment of GST. The term “agriculture produce” is defined under Explanation 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.06.2017 and same 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.
14.1 ‘Agricultural Produce’ as per the definition given in above the Notifications, should necessarily have three essential elements:
(a) It must be a produce out of cultivation of plant and rearing of all life forms of animals.
(b) On which no further processing is done or such processing is done as usually done by a cultivator or producer which does not alter its essential characteristics i.e. produce must broadly retain its physical and chemical form/constitution.
(c) Most importantly the processing done should be such as is usually done by a cultivator or producer which should only help it to attain marketability at primary market.
The said definition limits the scope of processing and allows only those activities which help the produces to attain the condition of its first marketability in primary market. After it attains the condition of first marketability the definition restricts all other further processes on the produce for further sale to be termed as ‘Agricultural Produce’. Once the products attains its first marketability for the primary market all other subsequent processes on produce leading to value addition and subsequent sale belong to the realm of secondary market thereon refraining the produce to fall under the category of ‘Agricultural Produce’ as defined in Notification.
14.2 The term ‘primary market’ is not defined in the GST Act. It is understood in common parlance as a platform or a place, like a mandi, where the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters, etc. It appears that services relating to the cultivation of plants include support services as may be required till the farmer disposes the agricultural produce in the primary market. All services and processes beyond the realm of the primary market are excluded.
15. The applicant has claimed that they are providing service of fumigation to the custom bonded warehouse where in agri produce of export are stored. It means that all the such agri produce which are going to be exported before storing in bonded warehouse have been processed further by the exporter to make the said agri product to become exportable. Hence subsequent process on agri produce leading to value addition and further export to out of the country belong to secondary market, do not cover under the category of “Agricultural Produce” as defined in Notification. Further, the applicant in their application has not elaborated what types of the agri produce are stored in custom bonded warehouse. Therefore, during the course of Personal hearing it was requested to the applicant to submit the copy of agreement entered between them and customer so that it can be concluded that whether the only agri produce as defined in the definition of explanation 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.06.2017 are stored in custom bonded warehouse or otherwise. However, the applicant failed to submit copy of any agreement entered between them and their customer.
16. Accordingly, in view of the above discussion we are of the view that in the custom bonded warehouse agri produce stored for export do not cover under the definition given under explanation 2(d) of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Further, in absence of any facts on the records we are not in position to conclude that the custom bonded warehouse are used exclusively only for storage of agriculture produce and are not used for storage of non agriculture produce. We have further observed that applicant in his application has submitted that in the custom bonded warehouse imported agri produce are also stored. The imported produce has been procured from the farmers in the foreign and exported to India. Clearly, it is, whether processed in a mill, no longer in the domain of the primary market or at the farmer’s hand. Hence in view of the aforesaid discussion we concluded that the fumigation service provided by the applicant in custom bonded warehouse where in exported and imported agriculture produce are stored is not covered under Sl. No. 54(h) of the Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, therefore, applicant service is liable to GST.
17. The applicant service of fumigation/pest control in Custom Bonded warehouse is liable to GST. Therefore, to determine the classification of the applicant service we refer the explanatory notes of classification Service Code SAC. The relevant entry of said explanatory Notes is as under :
99853 Cleaning services
998531 Disinfecting and exterminating services
This service code includes disinfecting dwellings and other buildings; disinfecting vehicles, e.g., buses, trains, boats, planes; exterminating insects, rodents and other pests; fumigation services and pest control services.
This service code does not include:
– pest (including rabbit) control services in connection with agriculture, cf. 998611
– timber impregnation services, cf. 998831
– cleaning of agricultural premises (hen houses, piggeries, etc.) cf. 998612
17.1 Further, we refer the relevant entry No. 420 of Annexure to the Notification No. 11/2017-CT (Rate) dated 28.06.2017 of SAC 99853 and same is produced as under :
| 420 | Group 99853 | Cleaning services | |
| 421 | 998531 | Disinfecting and exterminating services | |
| 422 | 998532 | Window cleaning services | |
| 423 | 998533 | General cleaning services | |
| 424 | 998534 | Specialised cleaning services for reservoirs and tanks | |
| 425 | 998535 | Sterilisation of objects or premises (operating rooms) | |
| 426 | 998536 | Furnace and chimney cleaning services | |
| 427 | 998537 | Exterior cleaning of buildings of all types | |
| 428 | 998538 | Cleaning of transportation equipment | |
| 429 | 998539 | Other cleaning services nowhere else classified |
Hence service of fumigation/pest control in warehouse provided by the applicant is merit classification under Service Accounting Code (SAC) 99853.
18. To determine GST rate of service classifiable under SAC 99853, we refer the Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended. The relevant entry No. 23 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended vide various Notifications is as under:
| 23 | Heading 9985 (Support services) | (i) Supply of tour operators services.
Explanation.- “tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours. |
2.5 | 1. Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
2. The bill issued for supply of this service indicates that it is inclusive of charges of accommodation and transportation required for such a tour and the amount charged in the bill is the gross amount charged for such a tour including the charges of accommodation and transportation required for such a tour. |
| (ii) Support services other than (i) above | 9 | – |
18.1 In view of the entry No 23(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 the rate of GST for the service of fumigation/pest control provided in a warehouse of agriculture produce would be 18 % i.e. {CGST 9% +SGST 9%}.
19. In the light of the above, we rule as under :
RULING
1. Fumigation services provided in a warehouse of agriculture produce is taxable or Exempt vide Entry No. 54 of Not. No. 12/2017-CT (Rate) dated 28.06.2017?
Ans. Fumigation services provided in a warehouse of agriculture produce is taxable in view of the above discussion.
2. Classification of Fumigation of such services under Service Accounting code 998531 is correct.
Ans. Classification of Fumigation of such services Service Accounting Code is 99853.
3. Determination of Tax liability to pay tax on such service.
Ans. The rate of GST for the service of fumigation/pest control in a warehouse of agriculture produce would be 18 % i.e. {CGST 9% +SGST 9%}.
