Mandi Fees is a levy generally on agriculture produces levied under the Agriculture produce Marketing Act. Mandi Fee is payable by the purchaser to the market Committee and not the seller albeit accounted for through him Agricultural Produce Marketing Rules. There has been lot of confusion in both pre-GST Regime and post GST Regime as well whether the same is to be added in the Sales Price/Value of Supply since it is a fees being collected by the seller/supplier.
Relevant Section-Section 15(2)(a) of CGST Act, 2017 provides that
The value of supply shall include—
any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier.
Relevant Judgement by AAR-Parvatiya Plywood (P.) Ltd  115 taxmann.com 62 (AAR- UTTARAKHAND)
As per the provisions of Section 15(2)(a) of the CGST/SGST Act, 2017, value of supply also includes any fee levied under any law other than CGST/SGST/UTGST Act. Therefore, fee levied under Agricultural Produce Marketing (Development and Regulation) Act, 2011 (Uttarakhand Act No. 9 of 2011) will become the part of the value of supply and will attract GST rate specified for a particular goods under the relevant chapter/Heading/sub-heading irrespective of the fact that whether GST is paid on forward charge basis or reverse charge basis.
The above judgement clearly provided that Mandi Fees would be falling under the provisions of Section 15(2)(a) and therefore would be added to the value of Supply.
Relevant Judgement Pre-GST Regime-CTO Circle-D Jaipur vs M/S Britannia Dairy Pvt Ltd on 28 February, 2014-Rajasthan High Court
- Definition of Sale Price-Before moving on the judgement, relevant definition of “Sale Price” is being reproduced hereinbelow for reference that the provisions of Section 15(2)(a) and Definition of “Sale Price” under the provisions of RVAT Act, 2003 were similar-
Section 2(36)-Sale price-means the amount paid or payable to a dealer as consideration for the sale of any goods less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods respect of goods or services rendered at the time of or before the delivery thereof, except the tax imposed under the VAT Act.
Therefore, the definition of Sale Price also provides that it should include “Statutory Levy” within its scope.
- Scope of “Statutory Levy” in Section 2(36) of RVAT Act, 2003 to construe sale price have of necessity to be construed as a statutory levy payable by the seller and not by the purchaser
To my mind the word statutory levy in the aforesaid definition of the sale price have of necessity to be construed as a statutory levy payable by the seller and not by the purchaser. Moreso the levy should relate to the sale transaction per se between the seller and purchaser and be part of the consideration passing from the buyer to the seller. To my mind for a statutory levy to be included within sale price as defined in Section 2(36) of the 2003 Act it has to be a charge by the seller on any ground whatsoever and not a charge by a third party from a purchaser for general facilities in the area of sale (here the Mandi Samiti).
- Observation by Rajasthan High Court that Mandi Fees is a tax on Buyer and is merely collected by the Seller
Mandi fee is to be paid by the purchaser under the Rules of 1963 to the Mandi Samiti for the infrastructure created by it for facilitating a transaction i.e. it is a charge independent of the privity of contract between the seller to the purchaser and not a part of the consideration paid to the seller by the buyer. The market fee charged by the Mandi Samiti is not a levy on the seller.
- Reference to Judgement of Constitution Bench of Supreme Court in the case of M/s. George Oakes (Private) Ltd. Vs. State of Madras [AIR 1962 SC 1037] wherein it was said that where tax is on the buyer and seller merely a collecting agency, it would remain outside the scope of selling price. Also relied upon of State of Punjab Vs. M/s. Chhabra Rice Mills (SC) and State of Punjab Vs. M/s Guranditta Mal Shrauti Prakash (SC)
“Further in case of M/s. George Oakes (Private) Ltd. Vs. State of Madras [AIR 1962 SC 1037] a Constitution bench of the Hon’ble Supreme Court has observed that where in law tax is on the buyer and the dealer a mere collecting agency, it would remain outside the sale price.”
The Rajasthan High Court also observed that
Aside of the aforesaid, in my considered opinion the issue agitated in the instant revision petition is wholly covered by the judgments of the Hon’ble Supreme Court in case of State of Punjab Vs. M/s. Chhabra Rice Mills (supra) and State of Punjab Vs. M/s Guranditta Mal Shrauti Prakash (supra) wherein it has been categorically held on principle that where the market fee is payable by the buyer and the seller merely deposits the said fee on behalf of the buyer and reimburses himself, the market fee cannot form part of the sale consideration or sale price.
- Held by the Rajasthan High Court
The market fee charged by the Mandi Samiti is not a levy on the seller and thus cannot constitute statutory levy within the meaning of Section 2(36) of the RVAT Act, 2003 liable to be included in the sale price.
Consequently, I find no substantial question of law as warranted under Section 84 of the RVAT Act, 2003 made out in the present revision petitions. There is no force in the revision petitions particularly in view of the judgment of Hon’ble Supreme Court in cases of State of Punjab Vs. M/s. Chhabra Rice Mills (supra) and State of Punjab Vs. M/s Guranditta Mal Shrauti Prakash (supra) and M/s. George Oakes (Private) Ltd. Vs. State of Madras (supra).
Impact in GST
Therefore, two principles can be culled out in GST Regime from the principle laid down in above decision with reference to the decisions of Apex Court-
- The scope of value of supply should be seen in the context of principle that it would include statutory levy which are on the supplier and collected by the Supplier and not on the recipient but only collected by the supplier. The decision by AAR might need reconsideration
- Mandi Fees should not be part of value of supply in GST.