Ginned Cotton - Agricultural Produce or not.

[VAISHACH Vaishach]

Hello Experts

As per S.No 21 of Notification No. 12/2017- Central Tax (Rate), dated 28.06.2017,

Services provided by a goods transport agency, by way of transport in a goods carriage of -

(a) agricultural produce;........ is Nil Rated .

Also having read the clarification of Circular No. 177/09/2022-TRU dated 03.08.2022,

The following is observed which is related to Storage or warehousing of cotton in baled or ginned form.

5.2 Prior to 18.07.2022, entry 24 B of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempted services by way of storage and warehousing of, inter alia, raw vegetable fibers such as cotton, flax, jute etc.

Cotton Fiber glossary by barnhardtcotton.net defines ‘cotton staple, virgin cotton or raw cotton’ as cotton fibers that are removed from the cotton seed by the gin.

Further, CESTAT Chandigarh in the case of R.K.& Sons vs CCE, Rohtak - 2016 (7) TMI 1712 - CESTAT CHANDIGARH has observed as under:

“Cotton (with seeds) as plucked from cotton plants can hardly be called cotton fibre in which case cotton fibre would come into existence only after the seeds are ginned away from cotton plucked from cotton plants. Cotton fibre obtained by ginning cotton plucked cotton plants is nothing but raw cotton fibre because there cannot be rawer form of cotton fibre obtained from cotton-with-seeds plucked from cotton plants.”

5.3 Accordingly, it is clarified that service by way of storage or warehousing of cotton in ginned and or baled form was covered under entry 24B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 in the category of raw vegetable fibres such as cotton.

It may however be noted that this exemption has been withdrawn w.e.f 18.07.2022

Now Coming to the question.

Based on the above explanation, can we consider that Cotton in Ginned or Bale Form can be considered as an agricultural produce and hence the Goods Transport Agency of Ginned or Baled Cotton is considered exempted?

The Client is owning a Spinning Factory and uses the cotton to be manufacture cotton yarn. He also purchases the Cotton from Traders after Ginning. No further process is undertaken.

Thank you for your responses in advance.

AI Summary

Cotton Processing Tax Status: Analyzing GST Exemption for Agricultural Goods Transport Under Notification 12/2017 A discussion forum explores the tax classification of ginned cotton under GST regulations. Legal experts debated whether ginned or baled cotton qualifies as agricultural produce for goods transport agency (GTA) exemption. The key considerations included processing stages, essential characteristics of cotton, and interpretations of notification No. 12/2017. Participants analyzed judicial precedents and statutory definitions to determine the tax treatment of cotton transportation services.