Rara Udhyog (GST AAR Rajasthan); Advance Ruling No. RAJ/AAR/2018-19/06; Dqated- 23/06/2018
Over View- Agriculture Produce
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;
Advance Ruling
1) Questions sought by the applicant:
Levy of GST/NIL rate of duty – processes undertaken on agricultural produce – Manufacture/ marketability – Cleaning of the various Agriculture produce like Saunf (Fennel) Dhaniya (Coriander), Jeera (Cumin seeds), etc. or the like goods which are brought to them by the farmers or by the traders.
2) Submission of the applicant :
i) That the applicant is engaged into the activities of cleaning of the various Agriculture Produce like Sauf(Fennel), Dhaniya(Coriander), Jeera(Cumin Seeds), etc. or the like goods which are bought to them by the farmers or by the traders.That the agriculture produce contain dust particles, certain small pieces of stones, dust, mud and other impurities, etc. The applicant is having cleaning plant and they remove the various impurities but do not change the essential character of the agriculture produce but make the product maketable for primary market.
The Following Notifications Below:-
i) Entry Sr. No. 24 (i)(i)(c) Notification No. 11/2017-C.T. (Rate)-28/06/2017 attracting NIL rate of tax : “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”
ii) Entry Sr. No. 24(i)(iii) of Notification No. 11/2017-C.T. (Rate)-28/06/2017 : “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”
iii) Entry 54(c) of Notification No. 12/2017-C.T. (Rate)-28/06/2017 :” 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”
ii) That the agriculture produce like Saunf(Fennel), Dhaniya(Coarinder), Jeera(Cumin seeds). etc are simply cleaned by the applicant at their cleaning plant. Such cleaning is necessary for making the products marketable for primary market and cleaning is a process which comes under the category of a process usually done by cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Thus, the process of cleaning at the end of the applicant firm does not alter the essential character. Hence the uncleaned agriculture produce remains the agriculture produce even after cleaning activity attracting NIL rate of tax under both the notification discussed above.
3) Findings and discussion- As per concerned officer :
i) The Jurisdictional Officer in his/her comments has started that the activity of cleaning is not being carried out at agriculture farm but at special cleaning plant installed away from agricultural farm. Further it is stated that cleaning activity cannot be defined as intermediate production process as job work in relation to cultivation of plants, hence are not covered under NIL rate of tax.
ii) Applicant M/S Rara Udyog, Jaipur has a cleaning plant installed at E-144. RIICO Industrial Area Bagru. Jaipur and undertakes removing of various impurities from various products such as saunf (fennel), dhaniya(coriander) jeera (cumin seeds) etc. or like goods brought to them for cleaning process
iii) Entry Sr. No. 24 (i)(i)(c) Notification No. 11/2017-C.T. (Rate)-28/06/2017 & Entry 54(c) of Notification No. 12/2017-C.T. (Rate)-28/06/2017 NIL rate of GST is provided on “those processes which are carried at Agriculture Farm and which do not change the essential characteristics of the Agricultural Produce but only make it marketable for primary market .i.e. first marketability. It limits the processing only to that extent which makes it marketable for primary market”
The above clearly states that exemption is avaiable only on those process which are carried at Agriculture farm and which do not change the essential characteristics of the Agriculturul Produce but only make it marketable for primary market i.e. first marketability.
iv) It limits the processing only to that extent which makes it marketable for primary market. Hence all other processes which are done after acquiring the stage of first marketability fall outside the scope of above clause – Secondly and most importantly processes undertaken on agricultural produce such as 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, should be carried out at Agricultural Farm i.e. all given processes must necessarily be undertaken at Agriculture Farm only then it would attract NIL rate under GST.
v) Applicant M/S Rara Udyog, Jaipur has himself stated that it has a cleaning plant which clearly suggests that it undertakes specialized activity of cleaning using specific machines and equipments which are installed at its premises and away from Agricultural farm – Thus As per Entry no. 24(i)(i) of the Notification No. 11/2017 Central tax (Rate) dated 28/06/2017 and the Entry No. 54(c) of the Notification No. 12/2017 Central tax (Rate) dated 28/06/2017 NIL rate of GST is Applicable on given processes only if undertaken at an agriculture farm and not otherwise.
The activity of mechanized cleaning does not fall under intermediate production process as job work in relation to cultivation of plants. Intermediate production process as job work in relation to cultivation of plants usually relates to agricultural operations directly related to production of any agricultural produce such as cultivation, harvesting, threshing, plant protection, testing, and supply of farm labour etc., carried out at agricultural farm – the activity of mechanized cleaning at an installed plant is not covered under the above clause too and does not attract NIL rate of Tax.
Ruling
The activity of the applicant i.e. M/s Rara Udhyog, Jaipur is not covered by Entry S. No. 24 (i)(i)(c) or S. No. 24(i)(iii) of Notification No. 11/2017 Central tax (Rate) dated 28/06/2017 AND Entry S. No. 54(c) or Entry No. 55 of Notification No 12/2017 -Central Tax (Rate) dated 28/6/17 & will not attract NIL rate of tax.
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