Fruit tree cultivation for biodiversity enhancement attracts 18% GST as environmental protection services, not agricultural services

The AAR, West Bengal ruled that cultivation and nurturing of fruit trees at marginalised communities and mangroves at coastal communities does not qualify as agricultural services under GST. The authority determined that since the applicant's primary objective was enhancing biodiversity and re-establishing ecosystem function for erosion protection rather than producing food, fibre, fuel or raw materials, the services constitute environmental protection services under chapter heading 9994. Consequently, the supply attracts 18% GST rate under serial number 32 of Notification No.11/2017-Central Tax (Rate) as environmental protection services, not the concessional rate applicable to agricultural support services.

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Issues Involved:
1. SAC Code & GST Rate for the outward supply made by the applicant in the case of fruit trees being cultivated and nurtured at marginalized communities.
2. SAC Code & GST Rate for the outward supply made by the applicant in the case of mangroves being cultivated and nurtured at coastal communities.

Issue-Wise Detailed Analysis:

Issue 1: SAC Code & GST Rate for Fruit Trees Cultivation and Nurturing
The applicant is engaged in the cultivation, planting, and nurturing of fruit trees in marginalized areas, aiming to create sustainable livelihoods and provide nutritious food. The applicant contends that these activities fall under "Agricultural Services" as per Notification No. 11/2017-Central Tax (Rate), under Serial No. 24 with Heading 9986, which has a NIL rate of GST.

The Authority for Advance Ruling (AAR) observed that horticulture, which includes the cultivation of fruit trees, is considered agriculture. The processes involved, such as land identification, nursery setup, and providing resources to farmers, align with agricultural operations directly related to the production of agricultural produce.

Ruling for Issue 1:
The supply of services for the cultivation, planting, and nurturing of fruit trees is covered under Serial No. 24 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, having SAC 9986, and therefore attracts a NIL rate of tax.

Issue 2: SAC Code & GST Rate for Mangroves Cultivation and Nurturing
The applicant also engages in the plantation of mangrove seeds and seedlings in coastal areas to enhance biodiversity and protect against erosion. The applicant argues that these activities should also fall under "Agricultural Services" with a NIL rate of GST.

The AAR, however, noted that the primary objective of the mangrove plantation is environmental protection rather than producing agricultural products for food, fiber, fuel, or raw materials. Therefore, these activities do not fall under "Support services to agriculture, forestry, fishing, animal husbandry" but rather under "environmental protection services."

Ruling for Issue 2:
The supply of services for the plantation of mangrove seeds and seedlings in coastal areas is covered under Serial No. 32 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, having SAC 9994, and therefore attracts a tax rate of 18% (CGST @ 9% + WBGST @ 9% or IGST @ 18%).

Conclusion:
1. The cultivation and nurturing of fruit trees are classified under SAC 9986 with a NIL rate of GST.
2. The cultivation and nurturing of mangroves are classified under SAC 9994 with an 18% GST rate.

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