Seed is not an agricultural produce; Not Eligible for GST Exemption of agricultural produce: AAAR

The appellant is registered under GST having GSTIN number 36 AAACG3220D1ZB. M/s Narsimha Reddy & Sons are primarily engaged in production and processing of agricultural seeds. In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seed in various facilities after processing them. In the process they also transport the seeds by engaging a GTA. The appeal is filed against the Order No.04/2022 dated 11.2.2022 (“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and services Tax) (“Advance Ruling Authority” / “AAR” / “lower Authority”).

The Advance Ruling against which the appellant has represented before Appellate Authority of Advance Ruling is as follows:

Order by Appellant Authority

In the present case, as per the written submission, the applicant takes organizing the production of agricultural seeds, storing the agricultural seeds, drying of maize cobs, it segregates part of the agriculture produce based on its quality and germination strength and undertakes preservation process such as clearing, drying, grading and chemical processing to make the seed fit for sowing purpose and to have better shelf life. The applicant has pleaded that till the chemical processing is taken up the seed retains the character of the agriculture produce on par with any agriculture produce and they are entitled for exemption in respect of services availed by them. Had the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant.

Further, the case law relied by them is not applicable on hand in as much as the issue dealt therein was relating to supply of milk and the issue in the present case is services with relation to seed.