Purchase of Bileaves from Gram Sabha

[Ashwin Bhalakiya]

Dear Sir

I am registered in Maharashtra. We purchase Tendu Leaves from Gram Sabha, a local body in Maharashtra. They collect leaves and sale to us. They are not registered in GST. Hence not charging any GST. Whether being a registered buyer purchasing from Local Body, whether I am required to Pay RCM, because as per Notification No 4/2017 dated 28th June 2017, any purchase of Bidi Wrapper- leaves from Agriculturist then GST under RCM to be paid at 18%. But here seller is not agriculturist. Please guide whether I am required to Pay GST under RCM.

Ashwin

[Sadanand Bulbule]

Refer Entry No. 5 of Notification No.13/2017-CTR dated 28/06/2017, which makes clear that any services supplied Central Government, State Government, Union territory or LOCAL AUHTORITY to a business entity are taxable under RCM. So in your case, although sale of tendu leaves by Gram Sabha is a supply goods, it can be treated as supply of service by the local authority for the purpose of RCM. In case of doubt, you may apply for Advance Ruling for confirmation of legal position as regards to RCM.

[YAGAY andSUN]

Based on the facts presented and relevant GST provisions, the applicability of Reverse Charge Mechanism (RCM) on your purchase of tendu leaves (bidi wrapper leaves) from a Gram Sabha, a local body in Maharashtra, is examined as under:

1. Relevant Legal Framework under GST

Notification No. 04/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time, governs the applicability of reverse charge under Section 9(3) of the CGST Act, 2017.

Sl. No. 5 of the Notification, read with corresponding entry under IGST and SGST notifications, specifies that:

Supply of bidi wrapper leaves (tendu) by an agriculturist to any registered person is liable to GST under reverse charge mechanism at the rate of 18%.

The entry reads:

Category of Supply of Services: Supply of bidi wrapper leaves (tendu leaves)

Supplier of Service: Agriculturist

Recipient of Service: Any registered person

GST Payable on reverse charge: Yes

Therefore, RCM is specifically made applicable only when the supplier is an “agriculturist”.

2. Definition of Agriculturist

As per Section 2(7) of the CGST Act, 2017:

“Agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of land by own labour, or by the labour of family, or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

Thus, only an individual or HUF cultivating land (including collection of forest produce like tendu leaves) under the stated method qualifies as an agriculturist. A Gram Sabha or local body does not fall under this definition.

3. Taxability When Supplier is Not Agriculturist

In your case, the supplier is a Gram Sabha, which is a local authority, and not an agriculturist within the meaning of the GST law. Hence, the exemption and RCM applicability under Sl. No. 5 of Notification No. 4/2017 is not attracted.

Further, no other entry under Notification No. 13/2017 (Central Tax – Rate) or its SGST counterpart specifically provides for RCM liability on the purchase of tendu leaves from local bodies.

Therefore, no reverse charge liability arises on the registered recipient (i.e., yourself) for purchase of tendu leaves from such local body (Gram Sabha), unless a specific notification is issued to that effect.

4. Implication of Supply by Unregistered Person

Although Gram Sabha is unregistered, the provisions of Section 9(4) of the CGST Act, 2017 (relating to RCM on purchase from unregistered persons) are currently suspended for all supplies except those notified by Government. There is no such notification making this supply taxable under Section 9(4).

5. Conclusion

In view of the foregoing legal provisions:

• The supplier being a Gram Sabha, a local authority, is not an agriculturist.
• Notification No. 4/2017 applies only when the supplier is an agriculturist.
• There is no other RCM notification making purchase of tendu leaves from a local body taxable under reverse charge.
• Hence, you are not liable to pay GST under reverse charge mechanism on purchase of tendu leaves from the Gram Sabha.

It is advisable to retain documentation establishing that the supplier is a Gram Sabha and not an agriculturist, to substantiate the position in case of departmental scrutiny.

https://tgct.gov.in/tgportal/Docs/Notifications/TGST/Updated%20TGST%20Rates,%202017%204-2017-CT(R).pdf

 

[YAGAY andSUN]

https://www.taxtmi.com/notifications?id=143708

[Shilpi Jain]

Pls chk the invoice issued. Whether the Gram Sabha is selling on behalf of the agriculturist or the Gram SAbha is itself selling.

In case it is on behalf then can be regarded as being sold by the agriculturist and liable under RCM. Refer to the GST circular on principal agent relationship to identify who is the seller.

[Sadanand Bulbule]

Here I wish to add that in many tribal areas, the prevailing system is Gram Sabhas facilitate or co-ordinate the sale of tendu leaves in an organised manner to have better price for the collectors of tendu leaves and other such minor forest produce. Normally Gram Sabhas do not buy and sell such forest produce on their own account. In that context, it amounts to supply of services by the Local Authorities and laible for RCM in the hands of the bsuiness entity. Who issues tax invoice and receives the consideration is relevant under such situation.

AI Summary

Tendu Leaf Purchase: Gram Sabha Not Covered Under GST Reverse Charge Mechanism for Buyer's Tax Liability In a GST-related query, a registered buyer seeks clarification on reverse charge mechanism (RCM) for purchasing tendu leaves from a local Gram Sabha. Legal analysis reveals that since the Gram Sabha is not an agriculturist, RCM provisions do not apply. The buyer is not required to pay GST under reverse charge, as the specific notification only covers purchases from individual agriculturists. Documentation supporting the supplier's status is recommended.