Treatment of services relating to Agricultural Sector under GST

I have received queries relating to services provided to Agricultural Sector, whether GST is applicable or exempted from our professional friends. So, I am trying to give clarification through this article ““Treatment of services relating to Agricultural Sector under GST” at my best of knowledge.

Here we come to know about some important terminology mentioned in the act relating to services provided to Agricultural Sector.

1.What is the meaning of “Agricultural” as per Law?

As per Section 65B(3) of the erstwhile Finance Act (Service Tax) Act has defined as “ Agricultural means the 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”.

2. What is the definition of “Agriculturalist”, as per GST Law?

As per Section 2(7) of the CGST Act,2017, “Agriculturalist” means an individual or a Hindu Undivided Family who undertakes cultivation of land:-

(a). By own,

(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 .

3. What is the meaning of Agricultural Produce as per GST Law?

As per Para 2(d) of the Notification No.12/2017-CT(Rate) ,dated. 28’th June’2017, “Agricultural Produce” means any produce out of cultivation of plant 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.

4. Whether food grain including wheat and pulses are agriculture produce under GST Law?

As per Circular No. 16/16/2017-GST, dated 15’th Nov’2017, CBIC has given clarification as below:

(1). Agricultural produce means” any produce our 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”.

(2). Tea used for making the beverage, such as black tea, green tea, white tea is a processed product made in tea factories after carrying our several processes, such as drying ,rolling, shaping, refining, oxidation , packing etc. on green leaf and is the processed output of the same.

(3). Thus, green tea leaves and not tea is the “agricultural produce” eligible for exemption available for loading , unloading, packing , storage or warehousing of agricultural produce. Same is the case with coffee obtained after processing of coffee beans.

(4). Similarly , processing of sugarcane into jiggery changes its essential characteristics. Thus, jiggery is also not an agricultural produce.

(5). Pulses, commonly known as dal, are obtained after dehusking or splitting or both. The process of de-husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore, pulses (dehusked or split) are also not agricultural produce. However, whole pulse grains, such as, whole gram, rajma etc., are covered in the definition of agricultural produce.

(6). In view of the above, it is hereby clarified that processed products such as tea (i.e. black tea, white tea etc.), processed coffee beans or power,pulses (de-husked or split ), jiggery, processed spices, processed dry fruits, processed cashew nuts etc. fall outside the definition of agricultural produce given in notification.

So, after refer the above circular, it appears that wheat would also be covered within the definition of agricultural produce .

5. What is the meaning of ‘Intermediary” under GST Law?

As per Notification No.12/2017-CT(Rate) ,dated. 28’th June’2017 ,Para2(zl), Intermediary has the same meaning assigned to it in Section 2(13) of the IGST Act,2017. Where as per the IGST Act, ”Intermediary” means a broker, an agent or any other person, by whatever name called ,who arranges or facilitates , the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

6. What is the meaning of “agricultural extension” under GST Act, 2017?

As per Notification No.11/2017-CT(Rate) ,dated 28’th June’2017, Para 4(vi) of CGST Act,2017, Agricultural extension means application of scientific research and knowledge to agricultural practices through farmer education or training. Extension services are classified into three types as below:-

(1). Technology transfer: The traditional model of the transfer of advice, knowledge and information in a linear manner,

(2). Advisory: The use by framers of a cadre of experts as a source of advice in relation to specific problem faced by them,

(3). Facilitation: The aim of this model is to help farmers to define their own problems and develop their own solutions.

7. What is the meaning of “Agricultural Produce Marketing Committee or Board under GST Law,2017?

As per Para 2 ( e) of the Notification No.12/2017-CT(Rate) ,dated. 28’th June’2017 , “Agricultural Produce Marketing Committee or Board” means any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of a agricultural produce.

8. What is the meaning of “agricultural operations and Testing” under GST Law?

As per Entry No. 24 of Notification No.11/2017-CT(Rate) ,dated 28’th June’2017, All testing and ancillary activities to testing , such as, seed certification, technical inspection, technical testing, analysis , tagging of seeds, rendered during testing of seeds are covered within the meaning of “testing”.

9. What is the meaning of agricultural processes under GST Act,2017?

Agricultural Processes or operations means shelling of paddy or cleaning of wheat carried out outside the farm be covered in the clause relating to services by way of processes carried out at an agricultural farm. Activities like the processes carried out in agricultural farm would also be covered if the same are performed outside the agricultural farm provided such processes do not alter the essential characteristics of agricultural produce but only make it marketable in the primary market.

Therefore, cleaning of wheat would be covered if the same is done outside the farm. Shelling of paddy would not be covered herein, since this process is never done on a farm but in a rice sheller normally located away from the farm.

However, if shelling is done by way of a service i.e. on job work, manually then the same would be covered under the exemption relating to “carrying out of intermediate production process as job work in relation to agricultural”.

10. If  a person or organization  provide  support services relating to agriculture, forestry , fishing and animal husbandry is whether exempt or taxable under GST Law?

Any person or organization provide the support services in respect of agriculture, forestry, animal husbandry, which have been exempted under the GST Act, vide entry 24 of Notification No.11/2017-CT(Rate) ,dated 28’th June’2017, relates to:-

(a). Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing,

(b). supply of farm labour,

(c). 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,

(d). Renting or leasing of agro machinery or vacant land with or without a structure incidental to it use,

(e). Loading, unloading, packing storage or warehousing of agricultural produce,

(f). Agricultural extension services,

(g). Services by way of Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce,

(h). Services by way of fumigation in a warehouse of agricultural produce,

(i).Services by way of pre-conditioning, pre-cooling , ripening, waxing , retail packing , labeling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables,

(j). Carrying out an intermediate production process as job work in relation to cultivation on 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.

11. Whether transportation of agricultural produce and food grain is taxable or exempted under GST Law?

As per Entry No.21 of Notification No.12/2017-CT(Rate) ,dated. 28’th June’2017,, Services provided by a goods transport agency, by way of transport in a goods carriage of following  inter-alia , goods are exempt:

(i). Agricultural Produce,

(ii). Goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed Rs,1,500/-,

(iii). Goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs.750/.

(iv). Milk, Salt and food grains including flour, pulses and rice,

(v). Organic manure.

12. Whether services relating to vegetables or fruits are exempt or taxable under GST?

Services relating to vegetables and fruits , in addition to the services in the above elsewhere the following services are also exempt, if they do not change or alter the essential characteristics of the said vegetables or fruits entry no.24(ii) of Notification No.11/2017-CT(Rate) ,dated 28’th June’2017, vide Circular No.19/19/2017-GST,dated. 20.11.2017.

(i). Pre-Conditioning,

(ii). Pre-cooling,

(iii). Ripening,

(iv). Waxing,

(v). Retails packing,

(vi). Labeling.

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