GST Caselaw

#GSTCase-101-Services of Loading and Unloading of “Imported Peas” is not exempted from levy of tax since “Peas” have been procured from farmers in the foreign land and exported to India and no longer in the domain of the primary market or at the farmer’s hand

#GSTCase-101-Services of Loading and Unloading of “Imported Peas” is not exempted from levy of tax since “Peas” have been procured from farmers in the foreign land and exported to India and no longer in the domain of the primary market or at the farmer’s hand

 

TP Roy Chowdhury & Co. (P.) Ltd. [2019] 108 taxmann.com 459 (AAR-WEST BENGAL)

  1. Query

Whether the service of loading and unloading of imported raw whole yellow peas is exempt under SI No. 54(e) of the Exemption Notification. It is admissible for advance ruling under section 97(2)(b) of the GST Act.

 

  1. Facts

Applicant is acting as a stevedore and handles imported raw whole yellow peas. Being a stevedore, applicant supplies service of loading and unloading of cargo in seagoing vessels.

 

  1. Contention of the Applicant

Yellow peas should be treated as ‘agricultural produce’ as defined in clause 2(d) of the Exemption Notification and, therefore, the service of loading and unloading of the cargo should be exempt in terms of SI No. 54(e) of the Exemption Notification.

 

  1. Observation by AAR

a) Exemption Entry

Service of loading, unloading etc. of agricultural produce is admissible for exemption under SI No. 54(e) of Exemption Notification, provided such loading/unloading service is related to the cultivation of plants and classifiable under SAC 9986. Scope of such support services extends to post-harvest crop services such as preparation of crops for the primary markets. In sync with it ‘agricultural produce’ is so defined as to include processes as may be done to make the produce marketable in the primary market without altering its essential characteristics.

b) What is meant by “Primary Market”

The term ‘primary market’ is not defined in the GST Act. It is understood in common parlance as a platform or a place, like a mandi, where the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters etc.

c) Scope of Exemption Entry Limited to processes till the Primary Market and the goods are at Farmer’s Hand

It appears that services relating to the cultivation of plants include support services as may be required till the farmer disposes the agricultural produce in the primary market. All services and processes beyond the realm of the primary market are excluded. The emphasis, therefore, is on the processes and services that are applied till the goods are at the farmer’s hand. As soon as they leave the farmer’s hand and the primary market, the services rendered thereafter are not to be considered related to cultivation of the plant and classifiable under SAC 9986.

d) Activity of the Applicant is not covered since the goods are imported from Farmers of Foreign Land and no longer in the domain of the primary Market

The Applicant renders the service of loading, unloading etc. after the cargo of yellow peas, imported from a foreign land, reaches the port of entry. The produce has been procured from the farmers in the foreign land and exported to India. Clearly, it is, whether processed in a mill, no longer in the domain of the primary market or at the farmer’s hand. Exemption under SI No. 54(e) of the Exemption Notification, therefore, is not applicable to the Applicant’s services.

 

  1. Held:

The Applicant supplies the service of loading, unloading etc. after the cargo of yellow peas, imported from a foreign land, reaches the port of entry. Exemption under SI No. 54(e) of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017, as amended from time, is not applicable to the Applicant’s service.

 

  1. Comment

AAR’s view that services relating to loading, unloading and warehousing would be exempt only to the extent such services are provided in the hands of Farmers might require reconsideration on following grounds:

 

  • Meaning of Agriculture Produce:

The definition of agriculture produce is being reproduced as below:

(d) “agricultural produce” means any produce out of 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, 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 primary market.

 

It is an admitted fact that the definition of “agriculture produce” restricts the meaning of the term to any product out of cultivation of plants on which

a) Either no processing is done, or

b) 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 primary market.

Therefore, for a product to fall under the category of “agriculture produce”, has to satisfy the condition of no processing or such processing which makes it marketable for primary market.

 

  • Services Exempted in relation to Agriculture Produce:

Further, Entry 54 of the Notification No. 12/2017-Central Tax Rate dated 28th June 2017 (as amended from time to time) provides as follows:

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 provided by a commission agent for sale or purchase of agricultural produce;

(h) services by way of fumigation in a warehouse of agricultural produce.

 

It can be observed above that the above entry is applicable on products falling in the definition of agriculture produce. Secondly once the product falls under the category of agriculture produce; para (e) of Entry 54 does not restrict it to only products in Farmers Hand. Any service of loading, unloading, packing, storage or warehousing of product which is an agriculture produce, would be exempt from levy of GST.

The entry wherein only services provided up to farmers hand were to be exempted have been inserted with a specific clause. For e.g. Entry 54(c) which is restricted to processes carried out at an agricultural farm operation which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market. However, under entry 54(e), there is no such restriction relating to primary market. Once the product falls under “agriculture produce”, meaning of which is linked with operations required for making ready for primary market; then services relating to such agriculture produce by way of loading, unloading, storage and warehousing is exempt from levy of tax. These services might be provided either to farmers, or any other person but so long as the product is covered under “agriculture produce”, then such services would be exempt from levy of tax.

Further let’s consider entry 54(g) above which provides that “services provided by a commission agent for sale or purchase of agricultural produce” would be exempt from levy of tax. Now the entry does not restrict exemption only to services provided in farmers hand. It provides a complete exemption for services provided by commission agent for sale or purchase of agriculture produce. If the meaning as provided by AAR is given to the entry, then the commission earned by commission agent from persons other than farmers, would be leviable to tax and commission earned from farmers would be exempted from levy of tax.

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