2022 (6) TMI 272 - AAAR - GST

Whole turmeric qualifies as agricultural produce under GST attracting 5% tax rate under HSN 0910 30 20

In Re: M/s. N.B. Patil,

The AAAR Maharashtra ruled that whole turmeric (dried but not powdered) qualifies as agricultural produce under GST law since post-harvesting processes ... Classification of goods - Turmeric (Turmeric in Whole form - not in powder form) - Agricultural Produce or not - HSN Code - rate of GST - Levy of tax on services rendered by the Appellant as a Commission Agent in APMC, Sangli - applicability of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 - requirement of registration under the CGST Act, 2017. HELD THAT:- On perusal of the definition of the term “agricultural produce”, it is observed that “agricultural produce” definition contains the expansion term “any” before the term “produce”, which clearly imparts a very wide connotation to the term “agricultural produce” under the GST law. The only constraint for any produce, to qualify for the “agricultural produce”, is that, either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market - In the instant case, the impugned product is Turmeric (whole), which is supplied by the farmers in the APMC by availing the services of the Appellant, who acts as an authorised commission agent in the sale/purchase of the impugned commodity in the APMC, Sangli. It is seen that the turmeric is harvested from the farm land in the form of raw turmeric. It is to be noted that the fresh turmeric contains moisture, and is blackish in colour, which renders the fresh or raw turmeric perishable and unsustainable. Therefore, to make it more sustainable and marketable, the raw turmeric is subjected to post-harvesting operation, like, boiling, drying and polishing, which are carried out by the farmers themselves on their farm land. Thus, it is clear that the impugned product, i.e., dried turmeric (whole) is a produce out of cultivation of plant, which is subjected to certain post-harvesting processes. Whether these post-harvesting processes on the raw turmeric are usually carried out by the cultivator or producer? - HELD THAT:- On perusal of the affidavit and the declaration made by the said organisation to the effect that various processes, such as, boiling, drying and polishing of fresh harvested turmeric are carried out by farmers in their farms to make the turmeric marketable, it is established beyond any doubt that the post-harvesting processes are carried out by the farmers or producers themselves on their farm. Whether the said post-harvesting processes carried out by the farmers alter the essential characteristics of the turmeric or not? - HELD THAT:- On perusal of the Test Reports, it is observed that there is no difference between the essential characteristics of the raw turmeric and the dried turmeric as oil content and the curcuminoid content are invariably present in both the samples, though in different concentration. The said difference in the concentration of both the components in both the samples, i.e., raw turmeric and dried turmeric, is attributable to the drying of the fresh/raw turmeric having greater content of moisture, which eventually gets removed upon drying during post-harvesting operation to render higher concentration of the aforesaid components in the dried turmeric. Whether the said post-harvesting processes on the raw turmeric are carried out to make it marketable for primary market? - HELD THAT:- The Appellant have submitted that normally, the turmeric in the raw/fresh form is not sold by the farmers in the market, therefore, various post-harvesting processes are carried out by the farmers to make the turmeric sustainable in terms of its appearance and quality, suitable for bringing into a market. Whether the APMC markets where the impugned product is sold by the farmers to the traders by availing the services of commission agent will be treated as primary market or otherwise? - HELD THAT:- Since, the term primary market is not defined under GST law, the letter dated 01.02.2022, issued by APMC, Basmathnagar, Distt.-Hingoli (Maharashtra) is referred, wherein it has inter-alia been declared that “The APMC market across the state of Maharashtra act as primary or wholesale market for sale of agricultural produce by the farmers where the Traders/wholesalers make the purchase of such agricultural produce, by following laid down procedure. Thus, attributable to the said APMC letter, it can be aptly concluded that the APMC market, where the impugned product is sold by the farmers, is nothing but primary market. HSN code and rate of GST on the impugned product - HELD THAT:- On perusal of the relevant Chapter and Heading, it is observed that the impugned product, i.e., dried turmeric(whole) will get classified under the Heading 0910 30 20 bearing description as “Dried Turmeric (Curcuma)”, attracting the GST at the rate of 5%. Whether the services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017? - HELD THAT:- On perusal of the entry at SI. No. 54 of the exemption notification, in the facts of the present case, it is observed that the services provided by the Appellant in the capacity of the commission agent for sale or purchase of impugned product, i.e., dried turmeric(whole), which has been held as an agricultural produce hereinabove, will not be subject to levy of GST. Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-I? If yes, under which section of the GST Act, he is required to be registered? - HELD THAT:- The Appellant, who is undertaking the supplies of agricultural produce purely as a commission agent for the farmer, are not liable for compulsory registration under clause (vii) of section 24 of the CGST Act, 2017. However, as they are also undertaking supplies of the impugned product from their own account as a trader, they are required to take registration under section 22(1) of the CGST Act, 2017 subject to the condition that their aggregate turnover exceeds the threshold limit prescribed under section 22(1) ibid. Issues Involved:1. Whether Turmeric (Whole form, not in powder form) is covered under the definition of 'Agricultural Produce' and exempt from GST.2. Determination of the HSN code and GST rate for Turmeric.3. GST liability on services rendered by the Appellant as a Commission Agent in APMC.4. Requirement for the Appellant to be registered under the CGST Act, 2017.Issue-wise Detailed Analysis:1. Definition of Agricultural Produce and GST Exemption:The term 'Agricultural Produce' under GST law is defined in Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. It includes produce out of cultivation of plants on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.In this case, the Appellant argued that the processes of boiling, drying, and polishing turmeric are carried out by farmers themselves to make it marketable. The Appellate Authority confirmed these processes do not alter the essential characteristics of turmeric. The turmeric thus qualifies as 'Agricultural Produce' because it meets all criteria: it is a produce out of cultivation, the processing is usually done by farmers, it does not alter the essential characteristics, and it is done to make the product marketable for primary markets.2. HSN Code and GST Rate for Turmeric:The HSN code for dried turmeric (whole) is 0910 30 20, and the applicable GST rate is 5% (CGST @ 2.5% + SGST @ 2.5%). However, the first supply of turmeric by farmers in APMC markets is not liable to GST due to the provisions of section 23(1)(b) and 2(107) of the CGST Act, 2017, which exempt agriculturists from GST registration and liability.3. GST Liability on Commission Agent Services:The services provided by the Appellant as a Commission Agent in APMC Sangli are not subject to GST. This is because these services are related to the sale or purchase of agricultural produce, which is exempt under SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017.4. Requirement for Registration under the CGST Act, 2017:The Appellant is required to be registered under section 22(1) of the CGST Act, 2017, for their trading activities. However, for activities as a commission agent, the Appellant is not required to be registered under section 24(vii) of the CGST Act because the principal (farmer) is not a taxable person. This conclusion is supported by CBIC Circular No. 57/31/2018-GST, dated 04.09.2018, which clarifies that commission agents making supplies on behalf of agriculturists are not liable for compulsory registration under section 24(vii).Order:The Appellate Authority set aside the Advance Ruling Order No. GST-ARA-108/2019-20/B-115 dated 22.12.2021 and ruled as follows:1. Turmeric (Whole form, not in powder form) is covered under the definition of 'Agricultural Produce'. The HSN code is 0910 30 20, and the GST rate is 5%. However, the first supply by farmers in APMC is not liable to GST.2. Services rendered by the Appellant as a Commission Agent in APMC, Sangli, are not liable to GST.3. The Appellant is required to be registered under section 22(1) of the CGST Act, 2017, for trading activities.