Agricultural produce exemption denied for rice commission services; milling changes paddy into a taxable, separately identifiable commodity.

Rice does not qualify as "agricultural produce" for the exemption covering commission agent services for sale or purchase of agricultural produce under Notification No. 12/2017-Central Tax (Rate). The ruling notes that rice is obtained from paddy through milling and related processes such as de-husking, steaming, polishing and sorting, which are not ordinarily carried out by the cultivator or producer and which create a separately identifiable, marketable commodity. Because the exemption is tied to the cultivation stage, commission agent services for rice millers and traders do not fall within the exempt entry. The commission received for canvassing sale or purchase of branded and unbranded rice is therefore taxable under CGST and KGST.

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Issues: Whether commission agent services relating to sale or purchase of rice, including branded and unbranded rice, qualify as exempt services as "services provided by a commission agent for sale or purchase of agricultural produce".

Analysis: The exemption under Notification No. 12/2017-Central Tax (Rate) applies only if the goods concerned are "agricultural produce" as defined in the notification. Rice is obtained after milling paddy through processes such as de-husking, steaming, de-browning, polishing and sorting. Those processes are not ordinarily carried out by the cultivator or producer and they change the essential character of paddy into a separately identifiable and marketable commodity, namely rice. The link between the exemption and the cultivation stage is not satisfied merely because paddy is an agricultural produce. The commission agent services rendered for rice millers and traders therefore do not fall within the exempt entry.

Conclusion: Rice is not agricultural produce for the purpose of the notification, and the commission agent services for sale or purchase of rice are taxable. The applicant is liable to collect and pay CGST and KGST on the commission received for canvassing rice, including branded and unbranded rice.

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