Appellate authority rules borewell drilling & compressor services not exempt for agriculture.

The appellate authority upheld the ruling of the Advance Ruling Authority that services related to drilling borewells and letting out compressors for agricultural purposes do not qualify as 'Support Service for agriculture' under SAC 9986 and are not exempt under SI.No.54 of Notification 12/2017-CT (Rate). The appeal was disposed of accordingly.

---

---

Issues Involved:
1. Classification of services related to drilling borewells and letting out compressors for agricultural purposes.
2. Applicability of exemption under SI.No.54 of Notification 12/2017-CT (Rate) dated 28.06.2017 to these services.

Issue-wise Detailed Analysis:

1. Classification of Services:
The appellant, engaged in drilling borewells and letting out compressors for agricultural use, sought clarity on whether these services are classified under 'Support Service for agriculture' (SAC 9986). The Advance Ruling Authority (AAR) ruled that both activities do not fall under SAC 9986, thus not qualifying for the exemption under SI.No.54 of Notification 12/2017-CT (Rate).

The appellant argued that these services should be classified under SAC 9986 as they are directly related to agricultural operations. They cited the inclusive nature of the definition of support services under SAC 9986, which encompasses services necessary for agricultural production.

2. Applicability of Exemption:
The appellant contended that their services should be exempt under SI.No.54 of Notification 12/2017-CT (Rate), which covers services related to the cultivation of plants and rearing of animals for agricultural produce. They referenced the Supreme Court's rulings in previous cases, emphasizing a broad interpretation of 'in relation to' and the inclusive nature of the exemption list.

The AAR, however, held that the appellant's services do not qualify for the exemption as they do not fit within the specific classification required. The appellant's practice of classifying similar services under different headings based on the end-use or location (agricultural lands vs. industrial use) was deemed inconsistent with GST classification principles.

Discussion and Ruling:
The appellate authority reviewed the appellant's arguments, the statutory provisions, and relevant case laws. They noted that the appellant's classification of services under different headings based on the end-use defies logic and law, as the same activity cannot have two classifications. The authority also highlighted the practical challenges in tax administration if such dual classification were allowed.

The appellate authority referred to the GST Council's discussions, which indicated no exemption was intended for borewell drilling for agricultural purposes. The Fitment Committee's deliberations and the GST Council's decision not to exempt these services further supported the AAR's ruling.

Final Decision:
The appellate authority found no reason to interfere with the AAR's decision. They upheld the ruling that drilling borewells and letting out compressors for agricultural purposes do not qualify as 'Support Service for agriculture' under SAC 9986 and are not exempt under SI.No.54 of Notification 12/2017-CT (Rate). The appeal was disposed of accordingly.

---