2024 (2) TMI 1055 - AAR - GST

Processing agricultural produce through de-husking and splitting requires GST registration and 18% tax rate

The AAR, Andhra Pradesh ruled that an applicant engaged in processing agricultural produce through de-husking and splitting of pulses must obtain GST ... Requirement of GST registration - dealing in brokerage of agricultural produce which is exempt - requirement to discharge GST - Rate of GST - HELD THAT:- In the instant case the applicant is involved in processing of the agricultural produce such as de-husking or splitting of the pulses to make the product marketable. Pulses commonly known as dal are obtained after dehusking or splitting or both. The process of de-husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore pulses (dehusked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce - It is clarified that processed pulses fall outside the definition of agricultural produce given in notification No. 11/2017-CT (Rate) and 12/2017-CT(Rate) and corresponding notifications issued under IGST and SGST Acts and therefore the exemption from GST is not available to them. Commission and brokerage - HELD THAT:- “Commission typically refers to income earned by a person for arranging a transaction between two parties and earning a percentage of the sales proceeds. The commission earned in such a scenario is taxable under GST as a service at 18%,” GST registration applies to all commission and brokerage income irrespective of the turnover limits of the taxpayer “Persons who make taxable supplies of goods or services or both on behalf of other taxable persons whether as an agent or not are required to take registration regardless of turnover - In the instant case the applicant is involved in the processing of the products and also facilitates the transactions between buyer and seller and collects brokerage charges. Therefore the applicant is required to obtain registration as well has to pay CGST @ 9% and SGST @ 9% as per notification 11/2017-central Tax (Rate) dated 28.06.2017 given below, irrespective of whether the goods involved in the transaction are exempted or taxable under GST. Issues involved:The judgment addresses the issues of GST registration and tax liability for a company dealing in brokerage of agricultural produce, specifically focusing on whether the company is required to obtain GST registration, if GST needs to be charged, and the applicable GST rate.GST Registration Requirement:The applicant, engaged in brokerage of agricultural produce, sought clarification on the necessity of GST registration due to dealing with exempt agricultural products. The ruling determined that the applicant is indeed liable for GST registration.Tax Liability and Applicable Rate:Regarding the tax liability, the judgment highlighted that the applicant must charge GST despite dealing with agricultural produce. The applicable tax rate was specified as CGST at 9% and SGST at 9% based on Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.Interpretation of Law and Findings:The applicant's interpretation of dealing with processed agricultural produce and charging GST at 18% was examined. The ruling clarified that processed pulses do not qualify as agricultural produce exempt from GST. The judgment emphasized that the applicant, acting as a commission agent and collecting brokerage charges, falls under the purview of GST registration and is subject to the tax rates specified under relevant notifications.Commission and Brokerage Taxation:The judgment elaborated on the taxation of commission and brokerage income under GST, emphasizing that such income is taxable at 18%. It further outlined that persons involved in facilitating transactions and collecting brokerage charges are required to obtain GST registration and pay CGST and SGST at 9% each, irrespective of the GST status of the goods transacted.Final Ruling:In conclusion, the ruling affirmed that the applicant is liable for GST registration, must charge GST on transactions, and the applicable tax rate is CGST at 9% and SGST at 9% as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.