2026 (3) TMI 242 - AAR - GST

Support services to animal husbandry: semen sorting is GST-exempt and classifiable under SAC 9986.

Semen sorting, being an intermediate production process performed as job work on semen belonging to another registered person and supporting artificial ... Classification of the service of semen sorting undertaken - exemption from GST - either SAC 9986 as support services or SAC 998612 as Animal Husbandry services - intermediate process in relation to rearing of animals - Specific SAC prevails over residual 'not elsewhere classified' entry. Semen Sorting Services exempt from GST - Support services to agriculture and animal husbandry - HELD THAT: - The service of sex sorting bovine semen is a specialised component of animal husbandry and directly supports artificial insemination and the rearing of livestock. Entry No. 24, Heading 9986 of Notification No. 11/2017 CT(R) grants nil rate for intermediate production processes carried out as job work in relation to rearing of all life forms of animals. Given that the applicant processes semen belonging to semen stations and returns the processed material for subsequent packaging and distribution, the activity qualifies as an intermediate production process supporting animal rearing and therefore falls within the exemption provided under Heading 9986. The legislative intent, reinforced by other exemptions for artificial insemination services and bovine semen, demonstrates that activities related to artificial insemination are intended to be exempted from GST. [Paras 12, 13, 15] Semen Sorting Services are exempt from GST as support services to animal husbandry under Heading 9986. Job work as intermediate production process - Support services to agriculture and animal husbandry - HELD THAT: - The applicant performs processing on goods (raw semen) belonging to the semen stations and returns the processed semen to them, satisfying the statutory definition of job work under Section 2(68) of the CGST Act. The definition does not exclude specialised or technical processes; hence, the specialised laboratory process of semen sorting qualifies as job work. Sub item (iii) of Entry No. 24 to Notification No. 11/2017 CT(R) explicitly covers intermediate production processes as job work in relation to rearing of animals, placing semen sorting within Heading 9986. Consequently, the activity is classifiable under SAC 9986. [Paras 14, 15] Semen Sorting Services are classifiable under SAC 9986 as job work forming an intermediate production process in relation to rearing of animals. Specific SAC prevails over residual 'not elsewhere classified' entry - HELD THAT: - Heading 9986 provides a specific classification covering support services to agriculture and animal husbandry, including intermediate job work processes. Prefatory guidance requires that where a service is capable of differential treatment, the most specific description is preferred over a general or residual description. Therefore, semen sorting cannot be relegated to the residual category of 'Other professional, technical and business services, not elsewhere classified' (SAC 998399) when a precise heading (9986) is applicable. [Paras 16] Semen Sorting Services are not classifiable under SAC 998399 because the specific Heading 9986 applies and takes precedence over the residual entry. Final Conclusion: The Authority ruled that semen sorting services undertaken as job work for semen stations are support services to animal husbandry and are classifiable under SAC 9986; such services are exempt from GST and cannot be placed under the residual SAC 998399 where a specific heading exists. Issues: (i) Whether semen sorting services qualify as an exempt service under GST similar to exemption granted to semen doses; (ii) Whether semen sorting services are classifiable under SAC 9986; (iii) In absence of a specific notification or classification, under which HSN/SAC code should semen sorting services be categorised.Issue (i): Whether semen sorting services qualify as an exempt service under GST similar to exemption granted to semen doses.Analysis: Semen sorting is an intermediate production process performed on semen belonging to semen stations and returned to them after processing. The activity supports artificial insemination and the rearing of animals, and falls within the scope of support services to animal husbandry. Notification No. 11/2017-Central Tax (Rate) entry for Heading 9986 provides nil rate for intermediate production processes as job work related to rearing of all life forms of animals. Entry No. 55A of Notification No. 12/2017-Central Tax (Rate) and notifications exempting bovine semen demonstrate legislative intent to exempt activities related to artificial insemination.Conclusion: Semen sorting services are exempt from payment of GST.Issue (ii): Whether semen sorting services are classifiable under SAC 9986.Analysis: The service is rendered as job work on goods (semen) belonging to another registered person within the meaning of Section 2(68) of the Central Goods and Services Tax Act, 2017. The service is a specialized intermediate process that supports animal husbandry and artificial insemination. Heading 9986 specifically covers support services to agriculture and animal husbandry, including intermediate production processes carried out as job work related to rearing of animals. Prefatory guidance requires choosing the most specific description where differential treatment is possible.Conclusion: Semen sorting services are classifiable under SAC 9986.Issue (iii): In the absence of a specific notification or classification, under which HSN/SAC code should semen sorting services be categorized?Analysis: A specific heading takes precedence over a residual 'not elsewhere classified' entry. Since Heading 9986 specifically covers intermediate job work processes related to rearing of animals and applies to the services in question, resort to a residual entry is not warranted.Conclusion: Not applicable in view of the rulings on Issues (i) and (ii).Final Conclusion: Semen sorting services are support services to animal husbandry and qualify as job work; they are exempt from GST and are to be classified under SAC 9986 rather than under any residual SAC.Ratio Decidendi: Where a service is an intermediate production process performed as job work on goods belonging to another registered person and specifically falls within a heading providing exemption, the specific heading (here Heading 9986) prevails over residual 'not elsewhere classified' entries, entitling the service to the exemption prescribed by the relevant notification.