In re Bansal Industries (GST AAR Punjab)
Whether purchase of raw cotton from Kacha Arhtia who is registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse charge mechanism in view of Section 9(3) of CGST/PGST Act,2017?
AAR held that the applicant is liable to pay GST under reverse charge basis being a registered person in terms of Notification No. 13/2017-Central Tax (Rate) dated 28th June 2017 as amended vide Notification No. 43/2017-Central Tax (Rate) New Delhi, the 14th November, 2017 and not the Kacha Arhtia.
Also Read AAAR Order: GST under RCM when raw cotton is supplied by a farmer via a Kacha Arhtiya
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, DELHI PUNJAB
1. M/s. Bansal Industries, as detailed in the table above and hereinafter referred to as ‘applicant’, had submitted an application for advance ruling in form GST ARA-01 dated 22.02.2019 seeking to know whether Purchase of raw cotton from Kacha Arhtia who is a registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of section 9(3) of CGST/ PGST Act, 2017?
2. Proceedings Under Section 98 of CGST/PGST Act:-
In this regard personal hearings were held on18.02.2022, 05.08.2022 and 16.08.2022 before the Advance Ruling Authority, Punjab. During proceedings on 18.02.2022,05.08.2022, Sh. Rishab Singla, Advocate appeared on behalf of the applicant and submitted his oral and written submission on the matter which are placed on file. On 16.08.2022, Sh. Rishab Singla, Advocate and Sh. Chinansha, Advocate appeared on behalf of the applicant and submitted additional submission on the matter which are placed on file.
3. QUESTION(S) ON WHICH ADVANCE RULING IS SOUGHT:- Whether Purchase of raw cotton from Kacha Arhtiya who is a registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of section 9(3) of CGST/PGST Act, 2017?
4. ELIGIBILITY OF THE APPLICATION FOR ADVANCE RULING:-
The Section 97(2) of the Central Goods and Services Tax Act, 2017, read with Section 97(2) of the Punjab Goods and Services Tax Act, 2017, provides for the issues on which advance ruling can be sought.
97 (2) The question on which advance ruling is sought under this Act, shall be in respect of-
(a) Classification of any goods or services or both;
(b) Applicability of a notification issued under the provisions of this Act;
(c) Determination of time and value of supply of goods or services or both;
(d) Admissibility of input tax credit of tax paid or deemed to have been paid;
(e) Determination of the liability to pay tax on any goods or services or both;
(f) Whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
The question falls under the ambit of Section 97(2) of the CGST Act,2017, read with Section 97(2) of the PGST Act, 2017. Hence, the application of the applicant is eligible for a ruling by the Punjab State Advance Ruling Authority.
5. SUBMISSIONS BY THE APPLICANT: –
5.1 The applicant has made the following submissions:-
1. In the present case, the assessee purchases Narma from Kacha Arhtiya who is a registered dealer, but is not charging GST. As per Notification dated 14.11.2017, tax on the purchase of raw cotton is to be paid under reverse charge mechanism by a registered dealer when purchased from agriculturist. It is submitted that the same is not applicable on the assessee as the assessee is purchasing cotton from registered dealer and is thus not liable to pay tax under Reverse Charge Mechanism.
2. In this regard, a circular dated 04.09.2018 bearing No.57/31/ 2018-GST has been issued by the CIBC, wherein scope of Principal-Agent relationship in context of Schedule-I of CGST Act has been explained. In the said circular, it has been clarified that the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of Principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name, then any provision of goods from the Principal to the Agent would fall within the fold of said entry, i.e. Supply of Goods. In the said circular, CBIC has mentioned certain scenarios and according to facts of the present case, the case of the petitioner falls within Scenario 4. It has been further clarified that in cases where the supply of agricultural produce is not exempted and liable to tax, such Commission Agent shall, be liable for compulsory registration under subsection (vii) of Section 24 of the Central GST Act.
3. Further, a Corrigendum dated 05.11.2018 has been issued to the said circular wherein para 9 has been amended and it has been clarified that where a Commission Agent is liable to pay tax under Reverse Charge, such an agent will be required to get registered compulsorily under Section 24(iii) of the CGST Act.
3.1 In this regard, an Advance Ruling has already been issued by the Haryana Authority for Advance Ruling Haryana in the case of M/ s Bhaktawar Mal Kamrq and sons in which it has been clarified as under:
“As per the above discussions, a commission agent who is making supplies on behalf of such agriculturist, who is not a taxable person, is not liable for compulsory registration under clause (vii) of Section 24 of the CGST/ HGST Act, 2017. However, if the aggregate turnover of supply of exempted as well as taxable goods by commission agents (Kachha Arhatia) exceeds the threshold limit, such commission agents shall be liable for registration as per Section 22(1) of CGST/ HGST Act, 2017.
As per Notification No. 121/ST-2, dated 14-11-2017 issued under Haryana Goods & Services Tax Act, 2017 read with corresponding Notification No. 43/2017-Central Tax (Rate) New Delhi, the 14th November, 2017 issued under Central Goods & Services Tax Act, 2017, raw cotton has been inserted at Sr. No. 4A in the table notified vide Notification No. 381ST -2, dated 30-6-2017 under the HGST Act, 2017 and corresponding Notification No. 4/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 under the CGST Act, 2017, The notification specifies that the tax on the supply of goods (raw cotton) by an agriculturist shall be payable on reverse charge basis by any registered person as the recipient of such supply. As discussed supra, a commission agent who becomes liable for registration under Section 22(1) of the Acts ibid, shall also become liable to pay tax on supply of raw cotton by an agriculturist on reverse charge basis being a registered person.
It is however, made clear that a commission agent (Pucca Arhatia) who does not inform his constituent as to the third party with whom he has entered into a contract on his behalf, rather he acts himself as the recipient of goods, has a personal interest of his own when he enters into a transaction inasmuch as he can also supply his own goods to the principal. Such commission agents are liable for registration since they qualify as agents under Schedule-I subject to the provisions of Section 22(1) of the Acts ibid where the aggregate turnover of supply of exempted as well as taxable goods or services or both exceeds the threshold limit. Such commission agents shall also be liable for compulsory registration as per provision of Section 24(1)(vii) of the Acts ibid and they shall be liable to charge tax or RCM on supply of ‘Raw Cotton’.”
6. SUBMISSIONS BY THE JURISDICTIONAL AUTHORITY:-
ACST, Fazilka has submitted written reply on behalf of the department.
ACST Fazilka as per his reply has stated that, “In order to reach at some conclusion in respect of above said question first of all we will have to analyse the provision and notification regarding levy of Tax on reverse charge basis which have been reproduced below:
Section 9(3) of the CGST/SGST (UTGST) Act, 2017 reads “The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”
Notification No. 4/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 G.S.R. 676 (E). –
In exercise of the powers conferred by sub-section (3) of sect ion 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby specifies the supply of goods, the description of which is specified in column (3) of the Table below and falling under the tariff item, subheading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, made by the person as specified in the corresponding entry in column (4), in respect of which the central tax shall be paid on reverse charge basis by the recipient of the intra-state supply of such goods as specified in the corresponding entry.
