In re Venkateshwara Hatcheries Private Limited (GST AAR Maharashtra)
A recent ruling by the Maharashtra Goods and Services Tax (GST) Authority for Advance Rulings (AAR) has clarified the classification and taxability of services provided by Venkateshwara Hatcheries Private Limited (VHPL) to Venkateshwara Research and Breeding Farm Ltd. (VRB). The ruling, issued on April 29, 2025, addresses the GST implications for selling arrangements, veterinary services, and laboratory analysis services.
Selling Arrangement: Not an Agricultural Produce Exemption
VHPL provides a comprehensive suite of services under a “Selling Arrangement” for VRB, including marketing, promotion, sales network maintenance, customer identification, sales forecasting, order procurement, invoicing, advance collection, delivery arrangement, and payment collection. These services also encompass post-sale feedback, handling returns and complaints, and furnishing market intelligence. For these services, VHPL receives a 10% commission on the sale value of birds.
VHPL sought to classify these selling services under Service Accounting Code (SAC) 9986, seeking exemption under Sr. No. 54 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. This notification exempts “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.”
The AAR, however, determined that the chicks sold are not “agricultural produce” as defined in the notification. The definition specifies produce “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.” The AAR observed that the chicks are sold to other poultry farmers for further rearing for purposes like food, rather than being agricultural produce themselves.
Consequently, the AAR ruled that the services provided by VHPL under the selling arrangement are akin to those of a commission agent engaged in the wholesale trade of livestock. Therefore, these services are appropriately classified under Heading 996111 (“Services provided for a fee or commission or on contract basis on wholesale trade”) and are not exempt under Sr. No. 54 of Notification No. 12/2017.
Veterinary Services: Eligible for Exemption
VHPL’s veterinary doctors provide extensive services to VRB’s customers, including recommending vaccines, advising on de-beaking and de-spurring, preventive medication, guidance on selecting breeders, diagnostic services (including post-mortem examinations), feed formulation recommendations, hatchery management suggestions, and on-site visits for data collection and advice. These services aim to diagnose diseases, monitor flocks, suggest treatments, and ensure overall flock health. VHPL receives a 3% commission for these services.
VHPL sought to classify these services under SAC 99835 and claim exemption under Sr. No. 46 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. This entry exempts “Services by a veterinary clinic in relation to health care of animals or birds.”
The AAR agreed with VHPL’s contention. It noted that the services provided, such as preventive medication, treatment suggestions, and feed formulations, fall within the scope of veterinary services for livestock. Although “clinic” is not defined in the GST Act, the AAR interpreted it in a general sense as a healthcare center where medical treatment or advice is provided. Given that VHPL employs specialized veterinary doctors at various locations to provide diagnostic, preventive, and nutritional advice to livestock, these services are considered to be provided “by a veterinary clinic” and are therefore exempt from GST under Sr. No. 46 of Notification No. 12/2017. The AAR classified these services under Heading 998352 (“Veterinary services for live stock”).
Laboratory Analysis and Testing Services: Taxable Technical Services
VHPL also provides laboratory analysis and testing services, encompassing post-mortem examinations, histopathology, bacterial and viral isolation, antibiotic sensitivity tests, serological examinations (e.g., AGPT, ELISA), PCR, identification of bacteria and viruses, proximate analysis of feed and ingredients (moisture, protein, fiber, fat, ash, minerals, toxins), and water quality tests. A 7% commission is received for these services.
VHPL argued for classification under SAC 9986, seeking exemption under Sr. No. 54 of Notification No. 12/2017-Central Tax (Rate), similar to their argument for selling services. They contended these were “agricultural extension services.”
However, the AAR rejected this classification and exemption claim. The authority found that these services, which involve scientific testing and analysis in fields like microbiology, biochemistry, and bacteriology, are distinct from “agricultural extension services” (which typically involve applying scientific research and knowledge to agricultural practices through farmer education or training). Instead, the AAR determined that these laboratory services are precisely described as “Technical testing and analysis services.”
Thus, the AAR ruled that these services are appropriately classified under Heading 998346 (“Technical testing and analysis services”) and are not eligible for exemption under Sr. No. 54 of Notification No. 12/2017, as that exemption is specifically for services under Heading 9986.
Conclusion of the Ruling
The AAR’s order, issued on April 29, 2025, provided clear answers to the applicant’s questions:
