Spraying services of agrochemicals provided directly to farmers qualify as exempted agricultural support services under Notification 12/2017-CT

AAR Haryana ruled that spraying services of agrochemicals provided directly to farmers constitute exempted supply under GST. The services, performed at agricultural land during pre-harvesting for crop protection without altering crop characteristics, qualify as agricultural support services under Notification No. 12/2017-CT. The activity falls under cultivation-related services including plant protection and processes that make agricultural produce marketable for primary market without changing essential characteristics. Since supply is exempt from GST, input tax credit cannot be availed.

---

---

Issues Involved:
1. Eligibility of the applicant for seeking an advance ruling.
2. Taxability of the supply of spraying services provided by the applicant.
3. Eligibility of the applicant to avail input tax credit if the spraying services are taxable.

Issue-wise Detailed Analysis:

1. Eligibility of the Applicant for Seeking an Advance Ruling:
The applicant must satisfy the conditions under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (HGST Act, 2017). Sections 97(2) of the CGST Act, 2017 allow Advance Ruling on questions related to the applicability of notifications, admissibility of input tax, determination of tax liability, and whether an activity amounts to a supply of goods or services. The applicant declared that the issue is neither pending nor decided in any proceedings under the Act, and the applicable fees have been paid. Thus, the applicant is eligible to seek an Advance Ruling.

2. Taxability of the Supply of Spraying Services Provided by the Applicant:
The applicant is engaged in manufacturing agrochemicals and providing spraying services to farmers. The applicant contends that the spraying services fall under Sr. No. 54 of Notification No. 12/2017-CT and Sr. No. 57 of Notification No. 9/2017-IT, which exempt services related to the cultivation of plants.

Determination of Supply:
- Section 9 of the CGST Act levies tax on intra-state supply of goods or services.
- Section 2(54) defines "goods" and Section 2(102) defines "services".
- Section 7(1) defines "supply" as including all forms of supply of goods or services for consideration.

There are two supplies by the applicant:
1. Supply of agrochemicals to distributors/dealers.
2. Supply of spraying services directly to farmers.

Both supplies are independent, and separate invoices are issued for each.

Levy of GST on Supply:
- The spraying services are considered an independent supply of services under the CGST, HGST, and IGST Acts.
- Notification No. 12/2017-CT and Notification No. 9/2017-IT provide exemptions for services related to the cultivation of plants.

Exemption Analysis:
- The service should fall under Heading 9986, which includes support services to crop production like spraying.
- The service must relate to the cultivation of agricultural produce.
- The term "agricultural produce" is defined to include produce from the cultivation of plants that are marketable in their primary form without altering essential characteristics.

The spraying services provided by the applicant meet these criteria as they are directly related to crop protection and do not alter the essential characteristics of the crops, making them marketable for the primary market.

3. Eligibility of the Applicant to Avail Input Tax Credit:
- Section 16 of the CGST Act allows registered persons to take credit of input tax on supplies used in the course of business.
- Section 17 restricts input tax credit to the extent attributable to taxable supplies.

Since the spraying services are exempted, the applicant is not eligible to claim input tax credit for inputs and input services used for providing these services. If the services were taxable, the applicant could claim input tax credit subject to conditions under Section 16(2) of the CGST Act.

Conclusion:
The Authority concluded that the spraying services provided by the applicant are exempt from tax under Notification No. 12/2017-CT and Notification No. 9/2017-IT as they are considered support services to agriculture. Consequently, the applicant is not eligible to avail input tax credit for inputs and input services used for these exempt services.

Ruling:
1. The supply of spraying services undertaken by the applicant is covered under Notification No. 12/2017-CT and hence, exempted from payment of tax.
2. Since the spraying services are exempt, the question of availing input tax credit does not arise.

---