Court exempts supply of certain pulses to NAFED from GST & rules on input tax credit eligibility

The court ruled that the supply of Kharif Arhar (Tur) and Green Gram to NAFED is exempt from GST as per Notification No.2/2017-Central Tax (Rate). Input tax credit on GST paid for gunny bags used for packing exempt goods is ineligible. Additionally, the TDS provisions under Section 51 of the CGST/KGST Act, 2017 do not apply to the applicant, a co-operative society not falling within the entities mandated to deduct TDS.

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Issues Involved:
1. Taxability of the supply of Kharif Arhar (Tur) and Green Gram to NAFED.
2. Eligibility of Input Tax Credit (ITC) on GST paid for gunny bags.
3. Applicability of TDS provisions under Section 51 of CGST/KGST Act, 2017.

Issue-wise Detailed Analysis:

1. Taxability of the Supply of Kharif Arhar (Tur) and Green Gram to NAFED:
The applicant, acting as the State Level Supporter (SLS) under the Price Support Scheme (PSS) announced by the Government of India, procures Kharif Arhar (Tur) and Kharif Green Gram from farmers and supplies them to NAFED. The transaction involves the supply of goods for consideration in the course of business, thus qualifying as a 'supply' under Section 7(1)(a) of the CGST Act, 2017. The Kharif Arhar (Tur) and Kharif Green Gram are classified under Chapter 7 of the Custom Tariff Act and fall under HSN Classification 07136000 and 07133100 respectively. As per entry No.45 of Notification No.2/2017-Central Tax (Rate) dated 28th June 2017, the supply of these items without any brand name is exempt from GST.

2. Eligibility of Input Tax Credit on GST Paid for Gunny Bags:
The applicant purchases gunny bags from third parties to pack the procured crops, paying GST at 5%. Since the supply of Kharif Arhar (Tur) and Green Gram is exempt from GST, the input tax paid on the purchase of gunny bags is ineligible for ITC as per subsection 2 of section 17 of the CGST Act, 2017. This section specifies that the credit amount shall be restricted to the input tax attributable to taxable supplies, including zero-rated supplies. Therefore, the input tax paid on gunny bags used for packing exempt goods cannot be claimed as ITC.

3. Applicability of TDS Provisions under Section 51 of CGST/KGST Act, 2017:
The applicant is a co-operative society registered under the Registrar of Co-operative Societies of Mysore and is not established by the Central Government, State Government, or a local authority under the Society Registration Act, 1860. Section 51 of the CGST Act, 2017 mandates TDS deduction by specific entities, including departments or establishments of the Central or State Government, local authorities, governmental agencies, or entities notified by the government. Notification 50/2018-Central Tax dated 13th September 2018 lists the entities required to deduct TDS, which does not include the applicant. Therefore, the TDS provisions under Section 51 of CGST/KGST Act, 2017 do not apply to the applicant.

Ruling:
1. The supply of Kharif Arhar (Tur) and Green Gram to NAFED is an exempt supply as per entry No.45 of Notification No.2/2017-Central Tax (Rate) dated 28th June 2017.
2. GST paid on the purchase of gunny bags cannot be claimed as input tax credit as per subsection 2 of section 17 of the CGST Act, 2017.
3. The provisions of TDS under section 51 of CGST/KGST Act, 2017 do not apply to the applicant.

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