2019 (10) TMI 615 - AAR - GST

Commission agent must register under CGST Act Section 22(1) for taxable supply of dry chillies.

In Re: M/s. Morigeri Traders

In Re: M/s. Morigeri Traders - 2019 (30) G.S.T.L. 52 (A. A. R. - GST), [2020] 74 G S.T.R. 327 (AAR) Issues Involved:1. Requirement of GST registration for the applicant.2. Section under which the Commission Agents are to be registered if required.3. Applicability of Notification No. 12/2017 - Central Tax (Rate) and Notification No. 9/2017 - Integrated Tax (Rate) to Commission Agents of APMC.4. Applicability of the aforementioned notifications to other entities if not applicable to Commission Agents.5. Classification of Dry Chilly as agricultural produce.6. HSN Code and GST rate for Dry Chilly if not classified as agricultural produce.Issue-wise Detailed Analysis:1. Requirement of GST Registration for the Applicant:The applicant, a commission agent supplying dry chillies on behalf of farmers, sought clarification on whether they need to register under the GST Act. Section 22 of the CGST Act mandates registration for persons making taxable supplies if their turnover exceeds the threshold limit. Section 24(vii) requires registration for those making taxable supplies on behalf of others. The applicant qualifies as an agent under Section 2(5) and para 3 of Schedule I of the CGST Act, as they have the authority to pass the title of goods on behalf of the principal. Therefore, the applicant is required to register under Section 22(1) of the CGST Act.2. Section under which the Commission Agents are to be Registered:The applicant must be registered under Section 22(1) of the CGST Act. This section stipulates that every person making taxable supplies must register if their turnover exceeds the threshold limit. The applicant’s activities qualify as taxable supplies, necessitating registration under this section.3. Applicability of Notification No. 12/2017 - Central Tax (Rate) and Notification No. 9/2017 - Integrated Tax (Rate) to Commission Agents of APMC:The applicant argued that their services are exempt under Section 11 and Notification No. 12/2017 - Central Tax (Rate), which exempts services by APMC or commission agents for the sale or purchase of agricultural produce. The Authority concluded that the services provided by the applicant to the principal (farmers) are indeed exempt under entry no. 54(g) of the Notification No. 12/2017 - Central Tax (Rate). However, the supply of dry chillies to traders under the applicant’s invoice is taxable.4. Applicability of the Notifications to Other Entities:Given that the notifications are applicable to commission agents of APMC, the question on applicability to other entities becomes moot. The notifications specifically exempt services provided by commission agents for the sale or purchase of agricultural produce.5. Classification of Dry Chilly as Agricultural Produce:The definition of agricultural produce under Notification No. 12/2017 - Central Tax (Rate) includes produce out of cultivation of plants with minimal processing that does not alter its essential characteristics. Dry chillies, being produced from plants and only dried to make them marketable, qualify as agricultural produce. Therefore, dry chillies fall under this definition.6. HSN Code and GST Rate for Dry Chilly:Since dry chillies are classified as agricultural produce, they are covered under Tariff heading 0904 and are taxable at 5% GST as per SI.No.38 of Schedule I to Notification 01/2017-Central Tax (Rate).Ruling:1. The applicant, as a commission agent, is required to register under Section 22(1) of the CGST Act, 2017.2. The services provided by the applicant to the principal are exempt under entry no. 54(g) of Notification No. 12/2017 - Central Tax (Rate), but the supply of dry chillies to traders is taxable.3. Dry chillies are classified as agricultural produce under the definition provided in Notification No. 12/2017 - Central Tax (Rate).