GST Treatment for Supply of Farm Labourers to the Agriculture R&D units and Farmers Who are growing taxable and non-taxable seeds.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs,

"A" is a supplier of Man Power for Farm Labour to various Farm Units who are engaged in Research & Development in Seeds Production, including commercial crops like Cotton seeds and other non-commercial seeds. One such unit is M/s RASI SEEDS PVT LTD (R&D FARM). They are exclusively engaged in seed research and development for better yields and sell to Farmers following the procedures prescribed by the Government. Such Units are procuring manpower for Farm Labour.  Supply of Farm Labour is exempted from Tax as per Notification 12/2017. 

Commercial seeds produced/ procured and processed, packed and sold are treated as taxable under GST as it is differentiated from the definition of “Agriculture Produce”, which is not treated as grains. It is affirmed in the Order in the case of M/s. Ganga Kaveri Seeds P. Ltd. 2022 (11) TMI 82 - APPELLATE AUTHORITY FOR ADVANCE RULING, TELANGANA, passed by TELANGANA STATE APPELLATE AUTHORITY FOR ADVANCE RULING vide Order-in-Appeal No. AAAR/09/2022 dated:19.10.2022 and also Advance Ruling in the case No. RAJ/AAR/2019-20/29, Dated 18-12-2019, of Mrs. Manju Devi, M/s M D Enterprises, by the Advance Ruling Authority, Rajasthan - 2020 (1) TMI 979 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN.

 "A"’ is denied exemption for the supply of Farm Labourers to such R&D Units because they are developing cotton seeds, which are taxable goods.

Whether “A” is liable to tax in the above situation, and even if he supplies farm labourers to Farmers growing taxable seeds?

AI Summary

Supply of farm labour: exempt to farmers for cultivation, but taxable when supplied to R&D seed units lacking cultivation.
Supplying farm labour directly to farmers for cultivation is exempt because the exemption targets cultivation-related services regardless of whether the produce (including seeds) is taxable. Supplying manpower to seed R&D units is likely taxable, since R&D field trials and experimental work are treated as outside ordinary agricultural operations; however, an interpretive argument exists that R&D cultivation for "other similar products" could fall within the exemption, making the question fact-sensitive and contested.