In re Raj Mohan Seshamani (GST AAR West Bengal)
Question: What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of fruit trees being cultivated and nurtured at marginalised communities?
Answer: Supply of services for cultivation, planting and nurturing of fruit trees shall be covered under serial number 24 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 having SAC 9986 and therefore shall attract Nil rate of tax.
Question: What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of mangroves being cultivated and nurtured at coastal communities?
Answer: Supply of services for plantation of mangrove seeds and seedlings in coastal areas shall be covered under serial number 32 of Notification No. 11/2017 – Central Tax (Rate) having SAC 9994 and therefore shall attract tax @ 18% (CGST @ 9% + WBGST @ 9% or IGST @ 18%).
Read AAAR Order: 18% GST on Supply of Mangrove Seeds & Seedlings Plantation Services in Coastal Areas
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, WEST BENGAL
1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression ‘GST Act‘ would mean the CGST Act and the WBGST Act both.
1.2 The applicant is stated to be engaged in the business of cultivation, planting and nurturing of fruit trees like citrus lemon, pomegranate etc in marginalised areas and mangrove seeds and seedlings in coastal areas across different states of the country with the sole aim of environmental protection against climate change. The applicant carries out these activities pursuant to the contracts awarded by internationally acclaimed environmental organizations.
1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:
1) What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of fruit trees being cultivated and nurtured at marginalised communities?
2) What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of mangroves being cultivated and nurtured at coastal communities?
1.4 The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a), (b) and (e) of sub-section (2) of section 97 of the GST Act.
1.5 The applicant states that the question raised in the application has neither been decided by nor is pending before any authority under any provision of the GST Act.
1.6 The officer concerned from the Revenue has raised no objection to the admission of the application.
1.7 The application is, therefore, admitted.
2. Submission of the Applicant
2.1 The applicant submits that he is engaged in planting and nurturing of mangrove seeds and seedlings along with fruit trees in marginalized areas for environment protection against the climatic changes. Contracts for carrying out this activity are awarded by the internationally acclaimed environmental organizations.
2.2 The applicant performs this activity under the outsourced arrangements for seeds collection, developing the seeds into seedlings in nurseries, pre-planting activities, planting of seeds, species and seedlings with the objective of protecting the nature and a fight against global warming.
2.3 The applicant claims that while aiming to enhance biodiversity and re-establish ecosystem function to protect the islands and the populace from erosion by way of planting of mangrove seeds and seedlings, he also aims to create sustainable livelihoods and provide nutritious food to the families and community residing in the nearby planting activities.
2.4 For the purpose of carrying out the activities with respect to planting of fruit trees, the applicant connects with small farmers in marginalized communities of different states of India and nurtures such fruit trees which in turn help the participating farmers to create sustainable livelihoods and provide nutritious food to their families and the community at large.
2.5 Processes involved in executing plantation of fruit trees, as submitted by the applicant, are as under:
(i) Initially, the land identification is made for planting activity and also people are identified who would nurture and take care of such activities.
(ii) Along with this, viability check report is procured by the expert team of the applicant in terms of water availability for fruit trees and identification of small and marginal farmers who will be benefitted from the produce of the trees planted.
(iii) Thereafter, a nursery is set up in nearby locality or near the identified area where saplings are grown from seeds to be planted in this arena. Nursery lands are taken on lease for 3 to 5 years from the local farmers. The applicant assists the farmers by providing quality saplings which are developed in the said nurseries or purchased from nearby nurseries.
(iv) Just after the Rabi and Kharif harvest season, the farmers are encouraged and helped to plant fruit trees in a small part of their land holdings. The applicant provides them all resources and infrastructure, both in terms of monetary as well as non-monetary.
(v) The applicant assists the farmers with organic fertilizers and pesticides as required from time to time and also imparts training to the farmers in horticulture.
(vi) The applicant also helps the farmers with getting their land holdings wherein the trees are planted been fenced across to protect from stray cattle or wild animals.
(vii) Further, the applicant assists the farmers in preparing small water tanks, ponds, bore well and other items required for irrigation to ensure survival and nurturing outer fruit trees planted in these areas.
(viii) This process is continued for a period of 1 to 3 years to ensure that 90% or more of the fruit trees survive and become a source of sustainable income and livelihood for the farmers.
2.6 Processes involved in executing plantation of mangrove trees, as submitted by the applicant, are as under:
(i) The applicant identifies the land for plantation of mangrove trees in the same manner as it is done for plantation of fruit trees.
(ii) Thereafter, trenches are dug fortnight in advance on the identified lands to allow sedimentation for planting of the mangrove seeds, propagules and seedlings.
(iii) The seeds are then collected from the mud lands or water bodies nearby and planted into the trenches dug by the local people appointed by the applicant.
(iv) The planting activity for the mangroves is done during monsoons and in low tide.
(v) Post plantations of seeds, local people are engaged to safeguard the fenced area and mangroves are monitored for 3 to 5 years to ensure its survival.
2.7 The applicant submits that the GST Act nowhere defines the term “Agricultural Activity” though in section 2(7) the term “Agriculturist” has been defined. So, an analogy has to be drawn from the other Revenue Acts. The term “Agricultural Income” has been defined u/s 2(1A) of the Income Tax Act, 1961. The definition of ‘Agricultural Income‘ under section 2(1A) provides that the following shall constitute Agricultural Income:
(i) any rent or revenue derived from land which is situated in India and is used for agricultural purposes [Section 2(1A)(a)],
(ii) any income derived from such land by agricultural operation including processing and sale of the agricultural produce as rent-in-kind so as to render it fit for the market [Section 2(1A)(b)],
(iii) income derived from building or land used for agricultural operation, in certain cases. [Section2 (1A)(c)].
2.8 The applicant submits that Hon‘ble Supreme Court of India had elaborately explained what constitute the term agriculture in depth in the case of CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC). It is a landmark case for the understanding of the term agriculture under the Income Tax Act. This judgment makes it clear that the term ‘agriculture‘ is “cultra”, i.e., cultivation of the “agar” i.e., field / land. In other word, raising of a product through the use of human skill and labour on land may be classified as agricultural activity. The “product should have some utility either for consumption, for trade and commerce. The term “Agriculture” receives a wider interpretation both with regard to its “operations” as well as the “results” of such operation.
2.9 The applicant submits that in the light of the definition given in the Income Tax Act and above referred landmark decision of the Hon‘ble Supreme Court of India on the matter, following ingredients must exist in an Agricultural Income:
