TaxTMI 
TaxTMI 
2024 (2) TMI 1056
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....t respectively) by M/s. Archipel India Foundation (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017. 3. Brief Facts of the case: 3.1 M/s Archipel India Foundation (Hearinafter referred to as "applicant") is a social enterprise in India that develops and implements community-based conservation and sustainable agricultural land management projects with small seale farmers. The Applicant is formed for social purpose to assist the people and society and rural development. 3.2 The Applicant has entered into a Project Development Agreement ("Agreement") with M/s. Shell Energy India Private Limited ("SEIPL") where, as per Schedule 1 of the said agreement, "Project" has been defined as Afforestation, Reforestation and Revegetation (ARR) for Sustainable Agriculture and Land Management and Afforestation. 3.3 The project will be undertaken in the state of Andhra Pradesh to increase productivity of privately held agricultural lands in 2 mandals of Integrated Tribal Development Agency, Paderu, Distriet Alluri Sitharama Raju, covering an area of approximately 23,000 hectares and 20,000 farmers. Applicant is having GST Registration number 3....
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....aid agreement, "Project" has been defined as Afforestation, Reforestation and Revegetation (ARR) for Sustainable Agriculture and Land Management and Afforestation. The project will be undertaken in the state of Andhra Pradesh to increase productivity of privately held agricultural lands in 2 mandals of Integrated Tribal Development Agency, Paderu, District Alluri Sitharama Raju, covering an area of approximately 23,000 hectares and 20,000 farmers. Copy of the agreement is enclosed as "Annexure-C" • SEIPL wishes to be a leader driving the energy transition and wishes to contribute to the global effort to tackle climate change and a front-runner in preservation of the environment. SEIPL intends to reduce its net carbon footprint and as part of this ambition is investing in nature-based solutions such as avoided deforestation, forest restoration and reforestation initiatives. • The Applicant and SEIPL wish to collaborate together to ensure the long-term success of ARR Project in the establishment of plantations and sustainable economic development of local communities. • Vide the aforesaid mentioned agreement, SEIPL has agreed to support developm....
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....es benefits both farmers and local communities, promoting economy growth in the community. • The Applicant wishes to refer to the scope of services to be performed under the Agreement as follows: Page 4 of the agreement - Definition AlF Service Obligations means the services (and related obligations) for the establishment, management and delivery of the Project listed in Schedule 1 (AIF Service Obligations) and undertaken by AIF in accordance with this Agreement, including Sustainable Agriculture and Land Management, Forest Management and Carbon Management Activities. Page 20 of the agreement - Project development and operations 5.7 AIF shall implement the Project as set out in, and in accordance with, each Project Description in Schedule 1 and any other requirements as may be communicated to AIF by the Joint Coordination Committee from time to time. 5.8 AlF shall be solely responsible to manage and maintain the relationships with farmers and local communities throughout the Project Duration, undertake any operational activities that may be quired to support farmers on ground in plantation required activities and enter into ....
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....that may be required to help the Carbon Consultant undertake their role effectively • Reporting on the physical and financial progress of the Project • From the above scope of work, the Applicant wishes to submit that activities of the applicant relating to Afforestation, Reforestation and Revegetation which includes plantation of trees/crops are activities relating to "preservation of environment". The applicant further submits that a significant percent of global greenhouse gas (GHG) emissions is caused by forest destruction and poor agricultural practices. Boosting carbon sequestration in forestry sector is an effective approach to reduce and remove emissions from the atmosphere. The afforestation and reforestation and revegetation program aim to establish and maintain a sustainably managed ecosystem for carbon sequestration, natural disaster risk reduction, poverty reduction with sustainable livelihoods in the coastal communities. • The Applicant wishes to submit the following in relation to billing and milestones aspects basis the agreement (clause g of page 24 and schedule 2 to page 51):- • The detailed milestone plan will b....
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....Principal Supply as "Support services to agriculture, forestry, fishing, animal husbandry" as provided in the Sl. No. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017 (as amended time to time) having SAC code 9986. 2. If the answer is affirmative, whether taxable rate applicable would be NIL in term no. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017. On Verification of basic information of the applicant, it is observed that the applicant is under State jurisdiction i.e, Paderu Circle, Visakhapatnam-II Division. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Central Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017. In response, remarks are received from the Central jurisdictional officer concerned stating that no proceedings lying pending with the issue, for which the advance ruling sought by the applicant. 5. Applicant's Interpretation of Law: - Classification of Supplies contemplated in the Agreement In order to understand the taxability of the transaction, it is relevant to first determine the nature and classification of supplies. In....
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.... "Support services to agriculture, forestry, fishing, animal husbandry" mean.- I. Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by 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 ....
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....aid activities are instrumental to the production of agriculture produce, and hence, ought to be categorized as incidental and ancillary for undertaking agricultural operations. * Raising nurseries * Procuring saplings (agreed species) including transportation of saplings and plantations. * Undertaking monitoring, maintenance and replacement of planted saplings and crops * Providing GPS coordinates of plantation and maintaining GIS platforms. Coordination with Carbon Consultant to achieve reduction in GHG as per the standards of VCS-CCB. This includes the followings activities: * Compliance with VCS-CCB requirements (Verified Carbon Standard - Climate, Community & Biodiversity) * Providing all support to the carbon consultant as necessary to file reports with Verra, issuance of credits, etc. * Providing any other relevant data (such as planting locations, species planted, community data, photographs etc.) as requested by the carbon consultant * Work closely with the Carbon Consultant and provide any other information and data that maybe required to help the Carbon Consultant undertake their role effectively These activities involve cultivation, plan....
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....house gas (GHG) remission. Further, this will also fulfill the requirements of certifying agency for registering the project. It is a support services provided by applicant with the available information's * From the above, it can clearly be noted that multiple supply of goods and services are contemplated in the present agreement. Each individual supply under the agreement may attract different rate of tax. In such scenario, CGST Act provides concept of 'composite supply' to determine the taxability of such bundled transaction and to provide certainty in respect of tax treatment under GST for such supplies. * The Applicant has discussed the concept of composite supply below to ascertain the taxability. B. Composite Supply * Section 2(30) of Central Goods and Services Tax Act, 2017 (CGST Act) defines 'composite supply as follows:- (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal su....
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....re listed as below: 1) The perception of the consumer or the service receiver - If large number of service receivers of such bundle of services reasonably except such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. 2) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. 3) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. It the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. for example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services nat....
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....cultivation or plantation services. Therefore, it can be said that the applicant would be rendering similar services for various service recipients, based on their requirements because that is main/core domain of the applicant 4. Activities starting from project design to cultivation, maintenance can only be done by one party and it is not possible to provide services separately because of dependence of one activity on another. Also, it can be noted that AlF possess specific expertise w.r.t cultivation and maintenance of trees and has the knowhow of which kind of trees are best suited for the particular geography. Here the attraction for service recipient is in the specific expertise of the AIF. 5. Activities starting from project design to cultivation, planation and maintenance are integral part of each other. It can be easily said that if one activity is removed other activities can't be performed. From the above discussion, the activities under the present agreement can be said to be naturally bundled. In conjunction with each other in the ordinary course of business- The supplies should be provided simultaneously at the same time or....
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....ed in terms of entry no 57 of notification 9/2017. The Hon'ble AAR authority observed that the scope of the applicant under the contract are followings:- * Promote Tree Based Agriculture as guided by Cauvery Calling * Farmer enrolment and Demand collection * Support farmers with sapling pickup from nurseries * Conducting proof of planting surveys * Conducting proof of survival surveys * Inventory tracking at nurseries The Hon'ble AAR authority held that the applicant, through mara mitras, provides education and training to the farmers for cultivation of plants / trees, by applying scientific research and knowledge which qualifies as agricultural extension services as per the definition. All the other activities of the applicant carried out through mara mitras from selection of saplings to assisting in transportation & planting, to monitoring the survival of plants are related to agricultural extension activity. Thus the services of the applicant are covered under agricultural extension services. Therefore, it can be noted that the authority relied on main activity of the applicant which is providing education an....
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....nder the present agreement is taxable at NIL rate of tax in terms of notification 11/2017. Conclusion * In view of the factual and legal position set out hereinabove, the applicant believes that the supply of services under the present agreement qualifies as composite supply wherein the principal supply is "Support services to agriculture" * The Applicant also believes that tax rate applicable on the aforesaid services is NIL, in terms of notification 11/2017-Central Tax (Rate) dated June 28, 2017 6. Personal Hearing: The proceedings of Personal Hearing were conducted on 08.01.2024, for which the authorized representative, Debasis Nayak, Director, attended and reiterated the submissions already made. 7. Discussion and Findings: We have examined the issues raised in the application in light of the facts from the records and arguments submitted by the applicant. We have considered the submissions made by the applicant in their application for Advance Ruling. We have considered the issues involved from which advance ruling is sought by the applicant and the relevant facts along with arguments made by the applicant and also their submissions made during the time of....
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....plies. In this regard, the applicant has captured relevant extract of explanatory notes to Service Code (Tariff) 9986 as per Notification No. 11/2017-Central Tax (Rate) below:- "9986 Support services to agriculture, hunting, forestry, fishing, mining and utilities 99861 Support services to agriculture, hunting, forestry, and fishing 998611 Support services to crop production. The Applicant has relied on the Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 which provides rate of tax also provides an explanation with regard to meaning of "Support Services to agriculture, forestry, fishing, animal husbandry". The applicant has extracted the same below for reference:- "Support services to agriculture, forestry, fishing, animal husbandry" mean.- I. Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of : a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; ....
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....monitoring, maintenance, and replacement (for early mortalities) of the planted saplings and crops The applicant has tabulated below the present scope of work linking with Coordination with Carbon Consultant to achieve reduction in GHG as per the standards of VCS-CCB. This includes the followings activities: Compliance with VCS-CCB requirements (Verified Carbon Standard - Climate, Community & Biodiversity) Providing all support to the carbon consultant as necessary to file reports with Verra, issuance of credits, etc. Providing any other relevant data (such as planting locations, species planted, community data, Photographs etc.) as requested by the carbon consultant Work closely with the Carbon Consultant and provide any other information and data that maybe required to help the Carbon Consultant undertake their role effectively The appellant's participation in the realm of carbon credit trading, on examination of records, stands as evidence of a significantly prove that the appellant is a commercial enterprise. Carbon credit trading, where the appellant is involved is a big business on commercial lines. We noticed this by carefully looking at their ....