In re N. B. Patil (GST AAAR Maharashtra)
Q1. Whether the Turmeric (Turmeric in Whole form – not in powder form) is covered under the definition of ‘Agricultural Produce’ and exempted from GST? If not, what is the HSN code of Turmeric and the rate of GST on the Turmeric?
A1. The Turmeric (Turmeric in Whole form – not in powder form) is covered under the definition of ‘Agricultural Produce’. The HSN code of Turmeric is 0910 30 20 and the applicable rate of GST is 5% (CGST @ 2.5%+ SGST@ 2.5%). However, the first supply of Turmeric (Turmeric in Whole form -not in powder form) by farmers, being supply by non-taxable person in Agricultural Produce and Marketing Committee, is not liable to GST by virtue of provisions of section 23 (1) (b) and 2 (107) of the CGST Act, 2017.
Q2. Whether services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017?
A2. Services rendered by the Appellant as a Commission Agent in APMC, Sangli, are not liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 4/2017-Central Tax (Rate), dated 28.06.2017.
Q3. Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-I? If yes, under which section of the GST Act, he is required to be registered?
A3. The Appellant is required to be registered in terms of Section 22( 1) of the CGST Act, 2017.
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING,MAHARASHTRA
1. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same, provisions under the MGST Act.
2. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “CGST Act” and “MGST Act”] by M/s. N. B. Patil, Plot No. 271, Market Yard – 2nd Lane, Sangli, Maharashtra – 416416, (“hereinafter referred to as “Appellant”) against the Advance Ruling No. GST-ARA-108/2019-20/B-115 dated 22.12.2021, pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as “MAAR”).
BRIEF FACTS OF THE CASE
Brief details of the activity relating to questions raised by the Appellant
3.1 Nitin Bapusaheb Patil, Proprietor of M/s. N. B. Patil, (hereinafter referred to as the Appellant) is a registered person under the CGST Act, 2017, having GST1N 27ABPPP6076P1ZK for supplying services as a ‘Commission Agent’ to farmers in Agricultural Produce and Marketing Committee, Sangli, Maharashtra (APMC Sangli).
3.2 The Appellant, as a ‘Commission Agent’, renders his services to farmers in relation to supply of turmeric (whole turmeric, not in powder form) to traders in APMC, Sangli. The Appellant is also engaged in selling the turmeric on his own as the ‘trader’.
3.3 The Appellant is registered as a ‘commission agent’ and also as ‘trader’ under the provisions of the Maharashtra Agricultural Produce and Marketing (Development and Regulation) Act, 1963 (The APMC Act), the Maharashtra Agricultural Produce and Marketing (Regulation) Rules, 1967 (The APMC Rules) and the Byelaws of the APMC Sangli.
3.4 Services of the Appellant as a ‘commission agent’ are regulated by APMC Rules and Byelaws of the APMC Sangli. Based on the tender / auction, if farmer and buyer mutually agree to sale and purchase, the Appellant, being a commission agent, facilitates activities ancillary to supply of turmeric in APMC Sangli. The Appellant gets a fixed commission @ 3% of the sale vale of the turmeric as per APMC Rules and Byelaws of the APMC Sangli.
3.5 In a situation where the Appellant is selling the turmeric in capacity of the ‘trader’, there is no dispute regarding applicability of GST on turmeric.
3.6 However, in a situation where the Appellant is engaged in selling the turmeric on behalf of the farmers in APMC markets as the ‘commission agent’ there is no clarity about the GST liability of the Appellant as the supply of turmeric by farmers is not liable to GST.
Application for Advance Ruling and the Advance Ruling Order
3.7 As there was no clarity, the Appellant decided to refer the matter before Maharashtra Authority for Advance Ruling to get clarity on the application of Goods and Services Tax on the activities carried out by the Appellant regarding sale of turmeric in APMC markets on behalf of farmers as commission agent.
3.8 In the background referred above, the Appellant vide the Advance Ruling Application Reference No. 108 dated 17.02.2020 sought Advance Ruling in respect of the following questions:
Question No. 1: –
Whether the Turmeric (Turmeric in Whole form – not in powder form) is covered under the definition of ‘Agricultural Produce’ and exempted from GST? If not, what is the HSN code of Turmeric and the rate of GST on the Turmeric?
Question No. 2: –
Whether services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017?
Question No. 3: –
Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-I? If yes, under which section of the GST Act, he is required to be registered?
3.9 The MAAR Authority has issued Order No. GST-ARA-108/2019-20/B-l 15 dated 22.12.2021 (hereinafter referred to as the impugned order) and answered the questions as under:-
(a) Dried and Polished Turmeric, as in the instant case, is not covered under the definition of ‘Agriculture Produce ‘and is not exempted from GST. The HSN code of the impugned product is 0910 30 20 and the rate of GST is 5% (2.5% each of CGST and SGST).
(b) The impugned services rendered by the applicant are taxable under GST and not exempt in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017.
(c) The applicant is required to be registered under the relevant provisions of the CGST Act, 2017 for his impugned activities.
3.10 The Appellant, being aggrieved by the impugned MAAR Order, has filed the present appeal.
Regarding delay in filing this Appeal
3.11 The Appellant submits that the MAAR Order has been passed on 22.12.2021. In terms of section 100 (2) of the CGST Act, the period of limitation for filing the appeal against the Advance Ruling Order before the Appellate Authority for Advance Ruling is 30 days from the date of communication of the AR Order. Thus, in consideration of above, the Appellant was supposed to file this Appeal on or before 20.01.2022.
3.12 Whereas the Hon’ble Supreme Court of India vide order dated 10.01.2022 in Miscellaneous Application No. 21 of 2022 / No. 665 of 2021 and in suo motu writ petition No. 3 of 2020, directed that the period from 15.03.2020 to 28.02.2022, is to be excluded for calculation of the limitation period on account of the pandemic situation caused by Covid-19.
3.13 In view of the aforementioned order of the Hon’ble Supreme Court, the Appellant submits that the limitation period will start from 28.02.2022. Hence, there is no delay in filing of this Appeal.
3.14 Without prejudice to above, with regards to the question of condonation of delay the Appellant submits that the proviso to sub section (2) of section 100 of the Central/ State Goods and Services Tax Act also grants power to the Appellate Authority to condone the delay in filing the appeal. Considering the Covid-19 pandemic situation the Appellant prays and requests to condone the delay in filing of this appeal as the same is being filed within the further period not exceeding 30 days.
GROUNDS OF APPEAL
Background about activities carried out by the farmer
4.1 Following background activities are carried out by the farmer:-
i Sowing of turmeric crop is done by the farmer in agricultural land. Normally, the turmeric crop is ready for harvest in seven to nine months depending on the variety and time of sowing. Usually, the land is ploughed, and the turmeric rhizomes / fingers / bulbs are gathered by hand picking or lifted with a spade.
ii Harvested turmeric is then washed with the help of normal water to clean the mud and other extraneous matter adhering to them. This process is done by farmers themselves on the farmland. The turmeric acquired is known as fresh turmeric. Generally, the consumption of the fresh turmeric is very minimal and marketing of the same is done by farmers themselves without bringing the same in to APMC markets. Therefore, the harvested turmeric before entering the APMC market is converted into a sustainable and non-perishable commodity through several post-harvest operations like boiling, drying and polishing which are carried out by farmers themselves.
iii Boiling is the first post-harvest operation to be performed at the farm level which involves cooking of fresh turmeric in water until soft before drying. The fresh turmeric is boiled in a movable boiler by farmers at their farmland. Boiling destroys the vitality of fresh turmeric, avoids the raw odour, reduces the drying time and yields uniformly coloured product.
iv Boiled turmeric is spread in the natural sun light for drying purpose by the farmers in the farmland only.
v As the colour of the processed turmeric influences the price of the produce, the farmers also carryout polishing of the turmeric. Dried turmeric has poor appearance and rough dull outer surface with scales and root bits. Polishing of dried turmeric also helps in removing the wrinkles and skin. The appearance is improved by smoothening and polishing the outer surface by manual or mechanical rubbing. The polishing consists of rubbing the dried turmeric fingers on a hard surface.
vi Generally, the polishing is done by farmers themselves with moveable polish machines using a rotating drum mounted on an axel of farm tractor. When the drum filled with turmeric is rotated with the help of farm tractor, polishing is effected by abrasion of the surface against each other as they roll inside the drum.
vii Farmers generally carry out the polishing of the turmeric to improve the appearance and thereby to increases the marketability. However, due to limitations of polishing process as explained hereinabove, the rough appearance continues to some extent and dull I pale blackish yellow colour is acquired to dried turmeric rhizomes / fingers / bulbs. This polishing process is carried out by farmers at the farm level only. Thereafter, such turmeric is packed in gunny bags and brought by farmers to the APMC markets for sale.
4.2 Whereas, the ultimate consumption of the turmeric in spices, in medicinal use or in industrial use is in the form of powder or pest and not in the whole form of turmeric as sold by farmers. Therefore, depending upon the end use and requirements of the consumers, the traders carry out further polishing and other process after purchasing the turmeric from the farmers in order to avoid black soil particles and achieve bright and vibrant yellow colour.
Legal Provisions under the APMC Laws:
4.3 Provision of APMC Law relevant for the current issue are furnished below:
The Maharashtra Agricultural Produce Marketing [Development and Regulation] Act, 1963
Section 2 (a) “agricultural produce” means all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture, fisheries and forest specified in the Schedule;
SCHEDULE [See section 2 (1) (a) and section 62]
I…. …….. to IX……… ………..
X. Condiments, spices and others
1. Turmeric
…. ……… …………..
XI……..to XIX……..
Section 31 Power of Market Committee to levy fees and rates of commission
(1)………………….
(2) It shall be competent to a Markel Committee to fix, with the prior approval of the State Government, the rate of commission (adat) to be charged *[by the commission agents from the buyer] in respect of an agricultural produce or class of agricultural produce marketed in the market area.
*These words were substituted for the words “by the commission agents” in 2017.
Legal provisions under GST Law
4.4 Provisions of GST law relevant for the current issue are furnished below.
The Central Goods and Services Tax Act, 2017
Section 2. Definitions.
…. ………. …… ……….
2(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;
2(7) “agriculturist” 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;
2(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;
2(107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24;
Section 9. Levy and collection.- (1) Subject to the provisions of sub-section (2), there shall be levied a tar called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
……… ………………
Section 22. Persons liable for registration.- (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees
……………………….
Section 23. Persons not liable for registration. (1) Following persons shall not be liable to registration, namely:-
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act:
(b) an agriculturist, to the extent of supply of produce out of cultivation of land.
(2) ……………
Section 24. Compulsory registration in certain cases. – Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-
…………………..
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
………………..
4.5 The Appellant is rendering the service as a commission agent to farmers in relation to sale of turmeric in the APMC Sangli. The Appellant believes and understands that the commission agent services provided to farmers relating to sale of turmeric are covered as ‘support services to agriculture by a commission agent for sale of agricultural produce’. The said services are classifiable under SAC 9986 in terms of entry si. No.24 of the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and attracts nil rate of GST as the same are provided for sale of agricultural produce. Simultaneously, the said services are also exempted in terms of entry SI. no. 54 of the Notification No. 12/2017 C.T. (Rate) dated 28.06.2017. As the nil rate of GST as well as the exemption is based on the ‘agricultural produce the meaning of the said term is also explained below the said notifications. Relevant entry of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is extracted below:
