2021 (12) TMI 722 - AAR - GST

Ruling: Rice Commission Agent Liable for GST on Services

The applicant, a rice canvassing commission agent, sought an advance ruling on whether their services are exempt from GST under the Agricultural Produce ... Taxability of commission agent services for sale or purchase of agricultural produce - Definition of 'agricultural produce' under Notification No.12/2017-C.T.(Rate) - Processing not done by cultivator alters essential characteristics - Exemption under Entry No.54 - services by a commission agent for sale or purchase of agricultural produce - Taxability of branded and unbranded goods - Registration requirement under section 22 of CGST Act, 2017Definition of 'agricultural produce' under Notification No.12/2017-C.T.(Rate) - Commission agent services-Entry No.54 - Processing not done by cultivator alters essential characteristics - Commission agent services for sale or purchase of rice do not qualify as exempt services relating to agricultural produce under Entry No.54 and are taxable. - HELD THAT: - The Notification defines 'agricultural produce' to include produce on which either no further processing is done or such processing is usually done by the cultivator/producer and which does not alter the essential characteristics but makes it marketable for the primary market. Rice is the outcome of milling processes (de-husking, steaming, de-browning, polishing, sorting etc.) normally undertaken by millers and not by cultivators. Those processes change the essential character of paddy into a distinctly identifiable and separately marketable commodity, namely rice. Because the processing is not usually done by the producer and the essential characteristics are altered, rice does not satisfy the criteria in paragraph 2(d) of the Notification. Further, the Entry is aimed at services linked directly to cultivation and primary-market marketing; the applicant assists rice millers and traders (manufacturers), not cultivators, so the necessary link to cultivation is absent. Consequently, the commission-agent activity in respect of rice is not covered by Entry No.54 and is not eligible for the exemption. The Authority therefore treats the services as taxable under the applicable SAC (notified as SAC 9961) and directs taxability under CGST/KGST at the rates applicable to such services. [Paras 10, 11, 12]Commission agent services for sale or purchase of rice are taxable and do not enjoy exemption under Entry No.54 of Notification No.12/2017-C.T.(Rate).Taxability of branded and unbranded goods - Liability to collect GST on commission for branded goods - Canvassing or commission-agent services for both branded and unbranded rice are taxable and the applicant is liable to collect CGST and KGST on the commission received. - HELD THAT: - The Authority found no distinction in the exemption analysis between branded and unbranded rice: since rice generally does not qualify as 'agricultural produce' under the Notification for the reasons given (processing not by cultivator and alteration of essential characteristics), services of canvassing/commission for sale of rice-whether branded or unbranded-fall outside the exempt entry. Accordingly, the applicant must register as required and discharge CGST and KGST on the commission consideration at the prescribed rates. [Paras 11, 12, 13]Canvassing and commission-agent services for both branded and unbranded rice are taxable; the applicant is liable to collect CGST @ 9% and KGST @ 9% on the commission.Final Conclusion: The Authority rules that the applicant's commission-agent services for sale or purchase of rice are not exempt as services relating to 'agricultural produce' under Entry No.54 of the rate Notification; the services-including canvassing for branded and unbranded rice-are taxable and the applicant must register and collect CGST @ 9% and KGST @ 9% on the commission received. Issues Involved:1. Whether the applicant is entitled to collect GST on the supply of services pertaining to the selling of agricultural produce as per the APMC Act.2. Whether there is any special case where the applicant has to collect GST on the service provided (branded and unbranded).Detailed Analysis:Issue 1: GST on Supply of Services Pertaining to Selling of Agricultural Produce as per APMC ActThe applicant, a rice canvassing commission agent for rice millers and traders, sought an advance ruling on whether their services are exempt from GST under the Agricultural Produce Marketing Committee Act (APMC Act). The applicant argued that their services should be exempt as they are selling agricultural produce (rice) and that rice is considered an agricultural produce under the APMC Act.The Authority examined the definition of 'agricultural produce' as per Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, which states that agricultural produce means any produce out of the cultivation of plants and rearing of animals, on which either no further processing is done or such processing is done as usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for the primary market.The Authority found that rice, which is obtained through the milling process of paddy, does not qualify as agricultural produce because:- The milling process involves de-husking, steaming, de-browning, polishing, sorting, etc., which are not usually done by the cultivator or producer.- The essential characteristics of paddy are altered during the milling process, resulting in rice, husk, and rice bran, which are distinctly identifiable and marketable commodities.Thus, the Authority concluded that rice does not qualify as agricultural produce under the said Notification, and the commission agent services for the sale or purchase of rice do not fall under the exemption provided in Sl.No. 54 of the Notification No. 12/2017-C.T. (Rate). Consequently, the applicant is liable to collect CGST @ 9% and KGST @ 9% on the supply of services relating to the sale or purchase of rice.Issue 2: GST on Service Provided (Branded and Unbranded)The applicant also sought clarity on whether they need to collect GST on services provided for branded and unbranded rice. The Authority reiterated that the services of a commission agent for rice millers and traders, whether for branded or unbranded rice, are taxable.The Authority emphasized that the services provided by the applicant do not fall under the exemption category as they are not directly linked to the cultivation process but are related to the marketing of rice, which is a processed product. Therefore, the applicant is required to register under Section 22 of the CGST Act, 2017, and discharge CGST @ 9% and KGST @ 9% on the consideration received or receivable as commission from the rice miller or traders.Ruling:1. The applicant is liable to collect CGST @ 9% and KGST @ 9% on the supply of services relating to the sale or purchase of rice.2. The applicant, by canvassing for branded and unbranded rice of millers and other traders, is liable to pay CGST @ 9% and KGST @ 9% on the consideration received or receivable as commission from the rice miller or traders.