TaxTMI 
TaxTMI 
2023 (12) TMI 939
X X X X Extracts X X X X
X X X X Extracts X X X X
....re held on 18.02.2022, 05.08.2022 and 16.08.2022 before the Advance Ruling Authority, Punjab. During proceedings on 18.02.2022,05.08.2022, Sh. Rishab Singla, Advocate appeared on behalf of the applicant and submitted his oral and written submission on the matter which are placed on file. On 16.08.2022, Sh. Rishab Singla, Advocate and Sh. Chinansha, Advocate appeared on behalf of the applicant and submitted additional submission on the matter which are placed on file. 3. QUESTION(S) ON WHICH ADVANCE RULING IS SOUGHT:- Whether Purchase of raw cotton from Kacha Arhtiya who is a registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of section 9(3) of CGST/PGST Act, 2017? 4. ELIGIBILITY OF THE APPLICATION FOR ADVANCE RULING:- The Section 97(2) of the Central Goods and Services Tax Act, 2017, read with Section 97(2) of the Punjab Goods and Services Tax Act, 2017, provides for the issues on which advance ruling can be sought. 97(2) The question on which advance ruling is sought under this Act, shall be in respect of- (a) Classification of any goods or services or both; (b) Appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation under subsection (vii) of Section 24 of the Central GST Act. 3. Further, a Corrigendum dated 05.11.2018 has been issued to the said circular wherein para 9 has been amended and it has been clarified that where a Commission Agent is liable to pay tax under Reverse Charge, such an agent will be required to get registered compulsorily under Section 24(iii) of the CGST Act. 3.1 In this regard, an Advance Ruling has already been issued by the Haryana Authority for Advance Ruling Haryana in the case of M/s Bhaktawar Mal Kamm and sons in which it has been clarified as under:- "As per the above discussions, a commission agent who is making supplies on behalf of such agriculturist, who is not a taxable person, is not liable for compulsory registration under clause (vii) of Section 24 of the CGST/HGST Act, 2017. However, if the aggregate turnover of supply of exempted as well as taxable goods by commission agents (Kachha Arhatia) exceeds the threshold limit, such commission agents shall be liable for registration as per Section 22(1) of CGST/ HGST Act, 2017. As per Notification No. 121/ST-2, dated 14-11-2017 issued under Haryana Goods & Services Tax Act, 2017 re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both." Notification No. 4/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 G.S.R. 676 (E). - In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby specifies the supply of goods, the description of which is specified in column (3) of the Table below and falling under the tariff item, subheading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, made by the person as specified in the corresponding entry in column (4), in respect of which the central tax shall be paid on reverse charge basis by the recipient of the intra-state supply of such goods as specified in the corresponding entry. Sr.No. Tariff Item, Sub-heading, heading or Chapter Description of supply of goods Supplier of goods Recipient of supply (1) (2) (3) (4) (5) 1 0801 Cashew Nuts not shelled or pealed Agriculturist Any regi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h are as follows: Kacha Arhtia:- As per The Punjab Agricultural Produce Markets (General) Rules, 1962 "Kacha Arhtia" means a dealer who, in consideration of commission, offers his service to sell agricultural producer; Recipient:- As per the definition contained in section 2(93) of CGST Act, 2017 "recipient" of supply of goods or services or both, means- (a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) Where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) Where no consideration is payable for the supply of service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; Now the question arises that who is liable to pay the consideration? The P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said Notification. This Notification was amended w.e.f 15.11.2017 vide Notification No. 43/2017-CT(Rate) dated 14.11.2017 which inserted a new Sr. No.4A in the Table to the Notification dated 28.06.2017 by virtue of which any registered person receiving supply of raw cotton from agriculturalist was made liable to pay tax on reverse charge basis. The amendment to the Table of impugned Notification reads as below:- TABLE Sr. No. Tariff item, subheading, heading or Chapter Description of supply of Goods Supplier of goods Recipient of supply 1 2 3 4 5 4A 5201 Raw Cotton Agriculturalist Any registered person The terms "agriculturist" and "registered person" are defined under clauses (7) and (94) of the Section 2 of the CGST Act, 2017 which are reproduced below: SECTION 2. Definitions:- In this Act, unless the context otherwise requires, (7) "agriculturist" means an individual or a Hindu Undivided Family who undertakes cultivation of land,- (a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind or by hired labour under personal supervisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9. The relevant part of the said section 9 of the CGST Act, 2017 and PGST Act, 2017 is as under: Section 9. Levy and collection:- (3) The Government may, on the recommendations of the Council, by Notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by Notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient oj such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2017 and PGST Act, 2017 deals with the scope of supply according to which the expression "supply" inter alia, includes the activities specified in Schedule-I of the Act, made or agreed to be made without a consideration. As per clause (3) of Schedule I, supply of goods- (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal is an activity to be treated as supply even if made without consideration. 7.12 The Notification No. 43/2017-Central Tax (Rate), dated 14-11-2017 had inserted Entry 4A in Notification No. 4/2017-Central Tax (Rate), dated 28-6-2017 to include raw cotton on which tax became payable under reverse charge mechanism by the recipient of supply, i.e., any registered person. 7.13 In the present case, the whole process of purchase of raw cotton is done under APMC Act wherein the Kacha Arhtia facilitates the sale of raw cotton from an agriculturist/farmer to the Applicant and every act done during this sale transaction is done as per Bye-Laws of APMC Act. The Kacha Arhtia receives by wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....principal-agent relationship under GST. In order to clarify some of the issues and to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168 (1) of the CGST Act hereby clarifies the issues in the succeeding paras. 2. As per section 182 of the Indian Contract Act, 1872, an "agent" is a person employed to do any act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the "principal". As delineated in the definition, an agent can be appointed for performing any act on behalf of the principal which may or may not have the potential for representation on behalf of the principal. So, the crucial element here is the representative character of the agent which enables him to carry out activities on behalf of the principal. 3. The term "agent" has been defined under sub-section (5) of section 2 of the CGST Act as follows: "agent" means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ht influence this relationship, it would be more prudent that an objective criteria is used to determine whether a particular principal-agent relationship falls within the ambit of the said entry or not. Thus, the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry. However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule-I of the CGST Act. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal. 8. Looking at the converge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gricultural produce by utilizing the services of Mr B who is a commission agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A. As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf of his principal, or facilitates buying and selling of agricultural produce on behalf of his principal and receives, by way of remuneration, a commission or percentage upon the amount involved in such transaction. In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under Schedule I. However, in cases where the invoice is issued directly by Mr. A to the buyer, the commission agent (Mr. B) doesn't fall under the category of agent covered under Schedule I. 9. In scenario 1 and scenario 2, Mr. B shall not be liable to obtain registration in terms of clause (vii) of section 24 of the CGST Act. He, however, would be liable for registration if his aggregate turnover of supply of taxable services exceeds the threshold specified in sub-section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp;"Pacca Arhtia" means a dealer, who for himself or on behalf of any other person makes or offers to make a purchase or sale of any agricultural produce or does or offers to do anything for carrying out such purchase or sale; Rule 2(9): "Kacha Arhtia" means a dealer who, in consideration of commission, offers his service to sell agricultural produce; From the above, we find that major difference between the above terms is that Pacca Arhtia makes sale or purchase for himself whereas the Kacha Arhtia in consideration of commission, offers his service to sell agricultural produce. 7.18.2 Further, sale of agricultural produce in Mandi is governed by Rule 24 of Punjab Agricultural Produce Markets (General) Rules, 1962, the relevant extract of which is reproduced below for reference:- "24. Sale of agricultural produce ........................... (1) All agricultural produce brought into the market for sale shall be sold by open auction in the principal or sub market yard. (2) Nothing in sub-rule (1) shall apply to a retail sale as may be specified in the bye-laws of the committee. (3) A committee may, and on bei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o-operative Society shall be exempt from the operation of this rule'. (11) The Kacha Arhtia shall make payment to the seller immediately after the weighment is over.... ........ (12) Every Kacha Arhtia shall, on delivery of agricultural produce to a buyer, execute a memorandum in Form I and deliver the same to the buyer on the same day or the following day, mentioning sale proceeds plus market charges admissible under rules and bye-laws. The counterfoil shall be retained by the Kacha Arhtia: Provided that nothing in this sub-rule shall apply where agricultural produce being vegetable or fruit, not exceeding one quintal in weight is delivered. (13) In the absence of any written agreement to the contrary the sale price of agricultural produce purchased under these rules shall be paid by the buyer to the Kacha Arhtia on delivery of Form-I. (14) Delivery of agricultural produce after sale shall not be made or taken unless and until the Kacha Arhtia or, if the seller does not employ a Kacha Arhtia, the buyer has given to the seller a sale voucher in Form-J, the counterfoil who of shall be retained by the Kacha Arhtia or the buyer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....24-A of The Punjab Agricultural Produce Markets (General) Rules, 1962, before passing on the same to the seller. In terms of Rules 24(12) and Rule 24(13) of the Punjab Agricultural Produce Markets (General) Rules, 1962, the Kacha Arhtia issues Form I (Bill of Kacha Arhtia) in case, he receives payment from the buyer and issues Form III (Bill of Kacha Arhtia for direct payment by buyer to the seller) in case the buyer directly makes payment to the seller. The formats of Forms I and III are given below: FORM I [See Rule 24 (12) and 24 (13)] Bill of Kacha Arhtia Counterfoil___________________ Book No.__________________ Serial No.___________________ Name of the Market ______________ Name of Kacha Arhtia ______________ Name of Buyer____________ Dated: ______________ Name of Commodity Weight Rate Total Market Charges Grand Total Rs. Rs. Rs. Commission ____________ Brokerage ____________ Palledari ____________ Filling Sewing ____________ Charges Other ____________ Charges ____________ Total ____________ Rs. Signature of Kacha Arhtia Acknowledgement by the buyer [FORM III] [See Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s per bye laws of APMC act and neither Kacha Arhtia has title of the agriculture produce/raw cotton at any stage of transaction. Even during the bidding process, the produce can be sold to a buyer only if the bid price is agreed to by the agriculturist and the Kacha Arhtia cannot act on behalf of the agriculturist at any stage. Further, the consent of the agriculturist has to be obtained even before the delivery of the auctioned produce takes place to the buyer, clearly showing that at no stage does the title of goods transfers to the Kacha Arhtia. 7.18.6 In view of the facts on record in the instant case as discussed above, We hold that, Kacha Arhtia does not fall under the Scenario 4 given in the CBIC Circular No. 57/31/2018-GST dated 04.09.2018 cited by M/s Bansal Industries in their supports as at no time during the process of sale-purchase of agricultural goods in the grain markets does the Kacha Arhtia have the authority to pass or receive the title of the goods on behalf of the agriculturist. At all times during the purchase of raw cotton at the Mandi, the title of the agricultural produce and the authority to pass on the title of the agricultural produce is vested exclus....