GST exempt on Supply of Kharif Arhar (Tur) & Green Grm crops to NAFED

In re The Karnataka State Co-Operative Marketing Federation Limited (GST AAR Karnataka)

Q1. Whether the transaction of supplying Kharif Arhar (Tur) Crops and Green Grm crops from farmers to NAFED is a taxble supply ? What is the rate of tax to be charged for sale of Agricultural produce to NAFED, if it is to be treated as taxable supply?

A1. supply of Kharif Arhar (Tur) and Green Gram to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.

Q2. Whether GST paid on purchase of Gunny bags by KSCMFL eligible to be claimed as Input Tax Credit?

A2. GST paid on purchase of Gunny bags shall not be claimed an input tax creditas per subsection 2 of section 17 of the CGST Act 2017.

Q3. Whether provisions of Section 51 and Notification 50/2018 – Central Tax dated 13th September 2018 applicable on KSCMFL i.e. is KSCMFL required to deduct TDS u/s 51 of CGST/KGST Act, 2017 on payments to be made by KSCMFL to NAFED?,

A3. The provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 does not apply to the applicant.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING

1. M/s The Karnataka State Co-Operative Marketing Federation Limited (herein after referred as applicant), No.8, Cunningham Road, Bengaluru-560052having GSTIN number29AAAAT3829KlZ3, filed an application for Advance Ruling under section 97 of the CGST Act, 2017 read with Rule 104 of CGST Rules 2017, and section 97 of the KGST Act, 2017 read with Rule 104 of KGST Rules 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.

FACTS OF THE CASE:

2. The applicant has submitted that the Government of India announces Minimum Support Price for oilseeds and pulses under its Price Support Scheme (PSS). The Department of Agriculture, Co-operation and Family Welfare has appointed National Agricultural Co-operative Marketing Federation Limited(NAFED) as one of the nodal agencies to Government of India for implementation of PSS.

3. The applicant has submitted that they have been appointedas the State Level Supporter (SLS) by the State Government of Karnataka to implement the Price Support Scheme (PSS). Accordingly, the applicant procures Kharif Arhar (Tur) and Kharif Green Gram from the farmers and supply it to NAFED.

4. Further the applicant submitted that they procure gunny bags from third parties at transaction value plus GST @ 5%. These gunny bags are utilised to pack the KharifArhar (Tur) and Kharif Green Gram as per the specifications issued by NAFED, the product does not bear any brand name.Cost of transportation of crop procured, handling charges, gunny bag pre-tax value is reimbursed by NAFED and NAFED also pays 2% of the Minimum Support Price as Administrative Markup to the applicant.

5. In this background, the applicant had sought Advance Ruling on,-

1. Whether the transaction of supplying KharifArhar (Tur) Crops and Green Gram crops from farmers to NAFED is a taxable supply? What is the rate of tax to be charged for sale of Agricultural produce to NAFED, if it is to be treated as taxable supply?

2. Whether GST paid on purchase of Gunny bags by KSCMFL eligible to be claimed as Input tax credit?

3. Whether provisions of Section 51 and Notification 50/2018 – Central Tax dated 13th September 2018  applicable on KSCMFL i.e. is KSCMFL required to deduct TDS u/s 51 of CGST/KGST Act, 2017 on payments to be made by KSCMFL to NAFED?

6. APPLICANT’S INTERPRETATION OF LAW:

6.1. The applicant submitted that they are in the business of procurement of Tur Dal and Green Gram from farmers at the Minimum Support Price and sell the same to NAFED.The transaction of selling of tur dal and Green Gram to NAFED falls within the scope of Supply as per section 7 of the CGST/KGST Act, 2017.The Tur Dal and GreenGram are classified under HSN Classification 07136000 and 07133100 respectively. Thesupply of tur dal and green gram to NAFED is an exempted supplyas per Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.

6.2. The applicant submitted that they procure gunny bags from third party suppliers by paying transaction value along with GST @5%and used to pack the tur dal and green gram which are exempted from GST. The applicant though satisfies all the conditions specified under Section 16, section 17 of CGST/KGST Act, 2017 read with Rule 41 of the CGST/KGST Rules, 2017 specifies that the amount of credit shall be restricted to so much of input tax as is attributable to said taxable supplies. Hence the input taxes paid on purchase of gunny bags are ineligible to be claimed as input tax credit.

6.3. The applicant further submitted that they are a co-operative society registered under the Registrar of Co-operative Societies of Mysore and not a society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860.They further submitted that it is neither established by any Government with 51% or more participation by way of equity or control, to carry out its function. The section 51 of the CGST Act 2017mandates following persons can deduct the TDS;-

a. a department or establishment of the Central Government or State Government; or

b. local authority; or

c.Governmental agencies; or

d. such persons or category of persons as may be notified by the Government on the recommendations of the Council, Further Notification 50/2018 – Central Tax dated 13th September 2018 has notified list of persons falling under clause “d” above who are required to deduct TDS and they are:-

(a) An authority or a board or any other body,-

ii. Set up by an Act of Parliament or State Legislature; or

iii. Established by any government

With 51% or more participation by way of equity or control, to carry out any function

b. Society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860

c. Public Sector Undertakings.

The applicant submitted that they do not fall under the list given neither in Notification 50/2018 – Central Tax dated 13th September 2018  nor under the list prescribed under Section 51 of CGST/KGST Act,2017.Therefore the provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 are not applicable on the applicant.

PERSONAL HEARING:

7. Sri. MukulHarinath Sringeri, CA and Duly Authorized Representative of the applicant appeared for personal hearing proceedings before this Authority and reiterated the submissions as narrated above.

FINDINGS AND DISCUSSION

8. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in parimateriaand have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.

9. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri. MukulHarinathSringeri, CA and Duly Authorized Representative during the personal hearing. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts & the applicant’s interpretation of law.

10. On verification of the nature of the activity carried out by the applicant it was observed that the Government of India announces Minimum Support Price for oilseeds and pulses under its Price Support Scheme (PSS). The Department of Agriculture, Co-operation and Family Welfare has appointed National Agricultural Co-operative Marketing Federation Limited (NAFED) as one of the nodal agencies to Government of India for implementation of PSS. However, in the State of Karnataka, Government has appointed the applicant as the State Level Supporter (SLS) to implement the Price Support Scheme (PSS) announced by the Government of India. As per the scheme, the applicant procuresKharifArhar (Tur) commonly known as Pigeonpea (Cajanuscajan) and Kharif Green Gram (Vigna radiate) from the farmers and supply it to NAFED.

11. In view of the above we shall examine whether the supply of KharifArhar (Tur) and Kharif Green Gram to NAFED is within the scope of supply in terms of Section 7(l)(a) of the CGST Act, 2017

Section 7(1) (a) of the CGST Act, 2017 stipulates that any transaction to get qualified as ‘supply’, must contain the following three components.-

i. The transaction must involve a supply of goods or services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made.

ii. The transaction must be for a consideration

iii. The transaction must be in the course or furtherance of business

In the instant case, the applicant is involved in the supply of theKharifArhar (Tur) and Kharif Green Gram to NAFED procured from the farmers for which applicant receives consideration in the course or furtherance of business. Hence the supply of KharifArhar (Tur) and Kharif Green Gram to NAFED by the applicant amounts to supply in terms of Section 7(l)(a) of the CGST Act, 2017

12. Further,KharifArhar (Tur) commonly known as Pigeon pea (Scientific name cajanuscajan) and Kharif Green Gram (Scientific name Vigna radiata)is classified under Chapter 7 of the Custom Tariff Act. The detail of the HSN Classification is as under.

Hence KharifArhar (Tur) and Kharif Green Gramclassified under the HSN 07136000 and 07133190 respectively.

13. The tariff item 0713 relating toDried Leguminous Vegetables, shelled, whether or not skinned or splitlisted under the entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017. Hence the supply of tur dal and green gram without any brand name by the applicant to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.

14. Further the applicant purchasing gunny bags from third parties to pack the procured KharifArhar (Tur) and Kharif Green Gram from the farmers, by paying GST @ 5%. Since the supply of tur dal and green gram is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.the input paid on purchase of gunny bags is ineligible to claim as input tax credit as per subsection 2 of section 17 of the CGST Act, 2017 . The subsection 2 of section 17 of the CGST Act, 2017 clearly says that, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies. The subsection 2 of section 17 of the CGST Act, 2017 is narrated as under;

17(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Hence input tax paid on the purchase of gunny bags shall not be claimed as input tax creditas per subsection 2 of section 17 of the CGST Act, 2017 as the applicant used the said gunny bags for packing and supplying exempted goods.

15. Further with regard to the third question it is admitted by the applicantthat applicant is the co-operative society registered under theRegistrar of Co-operative Societies of Mysore and it is not the society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860. The section 51 of the CGST Act 2017mandates following persons to deduct the Tax at source :-

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(c) Governmental agencies; or

(d) such persons or category of persons as may be notified by the Government on the recommendations of the Council,

Further Notification 50/2018 – Central Tax dated 13th September 2018  has notified list of persons falling under clause “d” above who are required to deduct TDS and they are:

(a) An authority or a board or any other body

i. set up by an Act of Parliament or State Legislature; or

ii. established by any government

with 51% or more participation by way of equity or control, to carry out any function

(b) Society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860

(c) Public Sector Undertakings.

In view of the above applicant is neither established by any Government with 51% or more participation by way of equity or control, to carry out its function nor is a Society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860. Hence the applicant is not covered under the list provided either in the Notification 50/2018 – Central Tax dated 13th September 2018  or under the list prescribed under Section 51 of CGST/KGST Act,2017.Therefore the provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 are not applicable to the applicant.

16. In view of the foregoing, we rule as follows

RULING

1. supply of Kharif Arhar (Tur) and Green Gram to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.

2. GST paid on purchase of Gunny bags shall not be claimed an input tax creditas per subsection 2 of section 17 of the CGST Act 2017.

3. The provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 does not apply to the applicant.