GST not applicable on first supply of Turmeric in Whole form by farmers: AAAR sets aside order of AAR

Nitin Bapusaheb Patil, Proprietor of Mis. N. 8. Patil, (hereinafter referred to as the Appellant) is a registered person under the CGST Act, 2017, having GSTIN 27 ABPPP6076P 1 ZK for supplying services as a ‘Commission Agent’ to farmers in Agricultural Produce and Marketing Committee, Sangli, Maharashtra (APMC Sangli).

The Appellant, as a ‘Commission Agent’, renders his services to farmers in relation to supply of turmeric (whole turmeric, not in powder form) to traders in APMC, Sangli. The Appellant is also engaged in selling the turmeric on his own as the ‘trader’.

The Appellant is registered as a ‘commission agent’ and also as ‘trader’ under the provisions of the Maharashtra Agricultural Produce and Marketing (Development and Regulation) Act, 1963 (The APMC Act), the Maharashtra Agricultural Produce and Marketing (Regulation) Rules, 1967 (The APMC Rules) and the Byelaws of the APMC Sangli.

Services of the Appellant as a ‘commission agent’ are regulated by APMC Rules and Bye laws of the APMC Sangli. Based on the tender I auction, if farmer and buyer mutually agree to sale and purchase, the Appellant, being a commission agent, facilitates activities ancillary to supply of turmeric in APMC Sangli. The Appellant gets a fixed commission @ 3% of the sale vale of the turmeric as per APMC Rules and Byelaws of the APMC Sangli.

In a situation where the Appellant is selling the turmeric in capacity of the ‘trader’, there is no dispute regarding applicability of GST on turmeric.

However, in a situation where the Appellant is engaged in selling the turmeric on behalf of the farmers .in APMC markets as the ‘commission agent’ there is no clarity about the GST liability of the Appellant as the supply of turmeric by farmers is not liable to GST.

As there was no clarity, the Appellant decided to refer the matter before Maharashtra Authority for Advance Ruling to get clarity on the application of Goods and Services Tax on the activities carried out by the Appellant regarding sale of turmeric in APMC markets on behalf of farmers as commission agent.

In the background referred above, the Appellant vide the Advance Ruling Application Reference No. 108 dated 17.02.2020 sought Advance Ruling in respect of the following questions:

Advance Ruling:

Question No. 1:

Whether the Turmeric (Turmeric in the Whole form – not in powder form) is covered under the definition of ‘Agricultural Produce’ and exempted from GST? If not, what is the HSN code of Turmeric and the rate of GST on the Turmeric?

Question No. 2:

Whether services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of Sl. 54 Heading 9986 of Notification No.12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No.1112017-C. T. (Rate) dated 28.06.2017?

Question No. 3:

Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-1? If yes, under which section of the GST Act, he is required to be registered?

Advance Ruling by AAR

The MAAR Authority has issued Order No. GST-ARA-108/2019-20/B-115 dated 22.12.2021 (hereinafter referred to as the impugned order) and answered the questions as under:

(a) Dried and Polished Turmeric, as in the instant case, is not covered under the definition of ‘Agriculture Produce ‘ and is not exempted from GST. The HSN code of the impugned product is 0910 30 20 and the rate of GST is 5% (2.5% each of CGST and SGST).

(b) The impugned services rendered by the applicant are taxable under GST and not exempt in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with Sl. No. 24 of Notification No. 1112017-C.T. (Rate) dated 28.06.2017.

(c) The applicant is required to be registered under the relevant provisions of the CGST Act, 2017 for his impugned activities.

The appellant, being aggrieved by the impugned MAAR Order, has filed the present appeal.

Advance Ruling by AAAR

13. We, hereby, set aside the impugned Advance Ruling Order No. GST-ARA-108/2019-20/B-115 dated 22.12.202 I issued by the Maharashtra Authority for Advance Ruling, and answer the questions raised by the Appellant as under:

(i) Turmeric (Turmeric in the Whole form – not in powder form) is covered under the definition of ‘Agricultural Produce’. The HSN code of Turmeric is 0910 30 20 and the applicable rate of GST is 5% (CGST @ 2.5%+ SGST@ 2.5%). However, the first supply of Turmeric (Turmeric in the Whole form -not in powder form) by farmers, being supply by the non-taxable person in the Agricultural Produce and Marketing Committee, is not liable to GST by virtue of provisions of section 23 (1) (b) and 2 (107) of the CGST Act, 2017.

(ii) Services rendered by the Appellant as a Commission Agent in APMC, Sangli, are not liable to GST in terms of SI. 54 Heading 9986 of Notification No.12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No.11/2017-C.T. (Rate) dated 28.06.2017.

(iii) The Appellant is required to be registered in terms of Section 22(1) of the CGST Act, 2017.