TaxTMI 
TaxTMI 
2023 (3) TMI 1252
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....ne by the applicant with respect to any goods and/or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term. Proviso with reference to the Section 98(2) of CGST Act, 2017 states that where the questions raised in the application is already pending or decided in any proceedings in the case of the applicant under any provision of this Act, the application may be rejected by the Advance Ruling Authority after providing an opportunity of being heard to the applicant. But in this case, the applicant has undertaken in form ARA-01 that the issue is neither pending nor decided in any proceedings under any of the provisions of the Act. Besides the applicable fees in the case stands paid by the applicant. So, he is eligible to seek an Advance Ruling under the above provisions and the case is being heard on merits. Statement of facts as per ARA-01 The Applicant is engaged in the business of manufacturing of agrochemicals. It supplies the agrochemicals to the dealers/distributors who then supply the same to farmers. The quantity of agrochemicals in the packets supplied by the Applicant to dealers/distributors is higher than the o....
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....rketable for the primary market. (c) The farmer approaches the Applicant directly for availing the spraying services after purchasing the agrochemicals from the dealer/distributor. The Applicant raises an invoice on the farmers for the services provided against the consideration which is determined as per the area of agricultural land for which spraying services are availed. (d) The spraying service is provided only when the farmer uses the agrochemicals manufactured by the Applicant. The Applicant does not provide spray services with respect to any other company's crop protection chemicals. (e) It is to be noted here that the sale of agrochemicals to distributors/dealers is independent of the spraying service provided to the farmers. They are under no obligation to ensure that the farmers procure the spraying services from the Applicant. (f) The farmers are also under no obligation to procure the spraying services from the Applicant while buying the agrochemicals from the Applicant's distributors/dealers. However, in the event farmer wishes to procure the spraying services from the Applicant then the agrochemicals have to be procured from the Applicant's distri....
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....eration is charged; (iii) Section 7(1) of CGST Act defines supply as: * all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; * import of services for a consideration whether or not in the course or furtherance of business; and * the activities specified in Schedule I, made or agreed to be made without a consideration. In the present matter, there are two supplies which are being undertaken by the applicant. First supply is undertaken when the agrochemicals are supplied to the distributors/dealers for which consideration is directly paid by the distributors/dealers to the Applicant. The second supply is undertaken when the spraying services are provided directly to the farmers for which consideration is paid by the farmers to the Applicant. Hence, one supply takes place between the Applicant and distributors/dealers. The second supply takes place between the Applicant and farmer which is the supply of spraying services. Both the supplies are independent of each other. The distributors/dealers are under ....
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....way of- (a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing, (b) supply of farm labour; (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market. (d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (e) loading, unloading, packing, storage or warehousing of agricultural produce; (f) agricultural extension services; (g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce; (h) services by way of fumigation in a warehouse of agricultural produce NIL NIL In order to fall under the above entry, the service should be covered under Heading 9986. In this regard, it is submitted that as per the Explanatory Notes to the Sch....
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....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 the primary market." This definition has three ingredients: a) The produce must emerge from cultivation of plants or rearing of all life forms of animals. b) Either no further processing is done or such processing is done as is usually done by a cultivator or producer on the said produce. c) The process undertaken does not alter its essential characteristics but makes it marketable for primary market. The spraying services as undertaken on crops consists of only above processes and not beyond them. All the three ingredients are fulfilled in the present case in the following manner: i) The first condition is that the produce must emerge from cultivation of plants or rearing of all life forms of animals. The crops on which spraying services is carried out is produced from cultivation of the crops which are in nature of plants. ii) The second condition is that cither no further processing is done, or such processing is done as is usually done....
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.... under Clause (a), following requirements should be fulfilled: a. Service should be directly related to cultivation of the agricultural produce; b. Service should be undertaken by way of agricultural operations; c. The agricultural operations should be in nature cultivation, harvesting, threshing, plant protection or testing. In this regard, it is submitted that the service of spraying agrochemicals is undertaken on the crops and at the agricultural land in order to protect the crops from weeds, pests etc. It has a direct impact on the growth as well as on health of the crops fulfilling the first condition. And secondly the services relating to the cultivation of plants or agricultural produce should be provided by way of agricultural operations. So, it is necessary to understand the meaning of the word "agricultural operations" which has not been defined in the Act and Rules made thereunder. Whereas the Hon'ble Supreme Court in the case of CIT v. Raja Benoy Kumar Sahas Roy (AIR 1957 SC 768) has held that the agricultural operations are of two types (1) Basic operations which include cultivation of the land and consequently tilling of the land, sowing of seeds, plantin....
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.... the spraying services are supplied by the Applicant to farmers on the crops at the agricultural land to preserve them from insects, pests etc. Thus, all three conditions stand fulfilled. The spraying service helps the farmer to protect its agricultural produce from weeds, insect infestation and fungus and also help farmers to produce safe and quality crop for consumption without altering the essential characteristics of such crop produce. As a matter of fact, if such agrochemicals are not sprayed, the crop may/can get damaged. Further, spraying in correct proportion is also important as both excess and lesser spray may not give optimum result. The Applicant is of the view that the spraying services as provided by it are covered under Sr. No. 54, clause (a) of Notification No. 12/2017-CT and Sr. No. 57 of the Notification No. 9/2017-IT. Alternatively, the Applicant is of the view that the said spraying services also fall under Sr. No. 54, clause (c) of Notification No. 12/2017-CT and Sr. No. 57 of the Notification No. 9/2017- IT. Clause (c) is as under: (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming,....
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...., etc. from somewhere or something" and the Oxford Learner's Dictionary defines it as "the use of special chemicals, smoke or gas to destroy the harmful insects or bacteria in a place". The agrochemicals through the process of the spraying are used on the crops at the agricultural farm to protect the produce from the attack of pests, weeds and rodents etc. Thus, this condition is also fulfilled by the Applicant. The fourth condition is that the services as provided by the assessee should not alter the essential characteristics of the agricultural produce. In this regard, it is submitted nature, shape, size, texture, color, odor, and cooking qualities etc of the crops pre and post the spray remain same. Thus, the spraying services do not alter or affect these characteristics of the crop produce. Thus, the services provided by the Applicant also fulfil this condition. The fifth condition is that the services should make the produce marketable at the primary market. In this regard, reliance in this regard is placed on the case of M/S. SHRI SAI PEST CONTROL (supra), wherein it was held that the term 'primary market' is understood as a platform or a place, like a mandi, wh....
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....tification No. 12/2017-CT, then the Applicant as per Section 16 of the CGST Act is entitled to take credit of input tax of inputs and input services used for undertaking the supply of spraying services subject to the fulfilment of the conditions enumerated under Section 16(2) of the CGST Act. Queries on which Advance Ruling have been sought:- 1. Whether the supply of spraying services undertaken by the Applicant is covered under Notification No. 12/2017-CT and hence, exempted from payment of tax? 2. If tax is payable, then whether Applicant can avail input tax credit of inputs and input services used for undertaking supply of spraying services? PERSONAL HEARING: Sh. Ankit Awal, advocate presented the case on behalf of the applicant on 14.07.2022. He briefed the matter to the authority. The matter was examined by the authority and further a notice was issued to the applicant on 22.09.2022 vide which he was advised to submit the bills raised by him to the farmers/agriculturalists. Secondly, the list of agrochemicals manufactured by the applicant was also sought. Thereafter, the applicant submitted the requisite details on 16.11.2022 which is as under:- Sr.No. Particulars Deta....
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....ther 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 the primary market. This definition appended with the notification clarifies that the produce out of the cultivation and produced by an agriculturist is an exempted supply under the Act. The said definition limits the scope of processing and allows only those activity which help the produces to attain the condition of its 1st marketability in the primary market. After it attains the condition of 1st marketability the definition restricts all other further processes on the Produce for further sale to be termed as agriculture produce. Once the products attains its first marketability for the primary market all other subsequent processes or produce leading to value addition and subsequent sale belong to the realm of secondary market thereon refraining the produce to fall under the category of Agricultural produce as defined in the Notification. Meaning thereby that any support services to be rendered to the agriculturist which helps in producing the crop which is fit for the primary market. The ter....
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....ket or for sale. d. Agriculture Process In general, the term Agricultural Process means the processing of crops after harvest, to prepare them for on-site marketing or processing and packaging elsewhere. It can be said that Processing of agriculture produce means transforming, packaging, sorting, or grading livestock or livestock products, agricultural commodities, or plants or plant products into goods that are used for intermediate or final consumption including goods for non food use. In the issue at hand, we can say that the services provided by the applicant is not related to the agricultural process. e. Agriculture extension:- Agricultural extension means application of scientific research and knowledge to agricultural practices through farmer education or training. Agricultural extension is another name for agricultural advisory services. In practical terms, extension means giving farmers, the knowledge of agronomic techniques and skills to improve their productivity, food security and livelihoods. In the present matter, the applicant's supply of services of spraying in the fields is not part of agriculture extension. f. Support services related to agriculture Basi....