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

The AAAR Maharashtra ruled that whole turmeric (dried but not powdered) qualifies as agricultural produce under GST law since post-harvesting processes like boiling, drying, and polishing are performed by farmers themselves without altering essential characteristics, making it marketable for primary markets. The product is classified under HSN 0910 30 20 attracting 5% GST. Commission agent services for agricultural produce sales in APMC markets are exempt from GST under relevant notifications. The appellant requires registration under section 22(1) of CGST Act 2017 only when trading on own account and exceeding threshold limits, but not for pure commission agent activities under section 24(vii).

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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.

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