RCM on freight paid for paddy straw

[KARAN VERMA]

Sir, whether RCM applicable on freight paid for paddy straw ?

[KASTURI SETHI]

Yes. RCM is applicable. Paddy straw is not food grain. Rice and paddy straw (husk) both are different products. Paddy husk(straw) is outer covering of paddy. It is not rice. No other exemption is available.

[KARAN VERMA]

Sir, can we considered paddy straw as agriculture produce being straw being part of paddy.

So that, transportation for agricultural produce exemption applicable.

[KASTURI SETHI]

Paddy straw is not an agricultural produce inasmuch as it is the result of milling process.

[Ganeshan Kalyani]

Notification no 13/2017 CTR dated 28.06.2017 defines the below term.

2(d) “agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, 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;

[Shilpi Jain]

If its services of GTA taken, liability will arise.

AI Summary

Reverse charge mechanism applies to freight for paddy straw because it is not covered by agricultural transport exemption. RCM applies to freight for paddy straw because paddy straw (husk) is a product distinct from rice and results from milling, making it processed rather than primary agricultural produce; therefore transport of paddy straw does not qualify for the agricultural-produce transportation exemption and freight supplied by a goods transport agency attracts tax liability under the reverse charge mechanism.