TMI Blog2021 (12) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... perations, supply of farm labour, processing of agricultural produce, leasing of agro machinery and land, services relating to agricultural produce and agricultural extension services. Commission agent services do not fall in any of the said clauses, and the same is also not claimed by the applicant. In the instant case the product viz., rice is a product of milling process involving de-husking, steaming, de-browning, polishing, sorting etc. of paddy, which is a produce out of cultivation of plants. Thus, both rice and paddy are produce out of cultivation of plants. But rice and paddy are not the same as rice is the outcome of milling process of paddy. While rice is readily consumable, paddy when subjected to milling processes yield rice, husk and rice barn. Milling process is not normally done by the paddy producer or cultivator, but is undertaken by the millers. Milling process also changes the essential characteristics of the produce from paddy to rice, which are both distinctly identifiable and separately marketable commodities. Thus, the criteria (ii), and (iv) above are not satisfied in the instant case, in as much as the processing is not done by the cultivator or the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the CGST Rules, 2017 and Section 97 of the KGST Act, 2017 read with Rule 104 of the KGST Rules, 2017, in FORM GST ARA-01 discharging the fee of ₹ 5,000/- each under the CGST Act and the KGST Act. 2. The Applicant is a Proprietary concern registered under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant is a Rice canvassing commission agent for rice millers and traders and are selling Agricultural Produce (Rice) as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. 3. The applicant has sought advance ruling in respect of the following questions: 1. Whether the applicant is entitled to collect GST on Supply of services which pertains to selling of agricultural produce as per APMC Act? 2. Is there any special case where the applicant has to collect GST on the Service provided (Branded and unbranded)? 4. Admissibility of the application: The question is about determination of the liability to pay tax on any goods or services or both and hence is admissible under Section 97(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... characteristic. The expression 'marketable' is qualified by the words for primary market'. In respect of agricultural produce, the APMC Yards are the primary markets and de husking of paddy into rice satisfies the requirement that it is to make it marketable for the primary market of APMC Yards. 5.5 The applicant further places emphasis on the wordings in the definition in paragraph 2 (d) of the notification - does not alter its essential characteristics and submit that the wordings are not does not alter its essential identity so as to postulate a contention that the process of de husking alters the identity of paddy into that of rice, a different commodity. 5.6 The applicant also relies on the ratio of judgment of the Hon'ble Supreme Court of India by larger bench of Hon'ble three Judges in the case of Deputy Commissioner of Sales Tax (Law) Board Revenue (Taxes), Ernakulam vs Pio Food Packers (1980) 46 STC 63 in which the decision of the Hon'ble Supreme Court is that pineapple fruit even after it is processed into slices, added with sugar as a preservative and canned, the essential characteristic of pineapple as a fruit is not altered: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any Agricultural Produce Marketing Committee or Board or Services provided by a commission agent for sale or purchase of Agricultural Produce . b. Are they required to collect GST under any of the provisions for Branded and un-branded goods? c. Whether the said exemption is applicable for the activity of Commission Agent for Branded Rice canvassing done by them, which is Taxable under GST Act. 3. As stated by the applicant they are acting as Commission Agent i. e, services provided for commission towards sale or purchase of agricultural produce. The said activity falls under Service Code (SAC)/ Heading 998619 of Section 8 and chapter 99 of GST Tariff and the same reads as Supporting services to agriculture, hunting, forestry and fishing - other support services to agriculture, hunting, forestry and fishing . 4. The effective rates for the services are notified under Notification No. 11/ 2017-C.T.(Rate) and 12/ 2017-C.T. (Rate), both dated 28.06.2017 and the said notifications list the activity of Commission Agent under clause (g) of Sl.No.24 and Sl.No.54 of the said notifications and description of the mentioned as Services by any Agricultural Produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary market. In the light of the aforesaid definition, any products in order to be called an agricultural produce must satisfy the following criteria; (i) Any produce out of cultivation of plants and rearing of all life forms of animals. (ii) No further processing is done and if any processing is done, it is usually done by the producer or the cultivator. (iii) The said processing does not alter the essential character of such produce/ product. (iv) Such initial processing render the product marketable. 6 In the instant case of product viz., Rice is the final product obtained by milling the paddy by the rice milers. When we apply the above criteria to qualify 'Rice' as agricultural produce, the criteria (i) stated above has been fulfilled as rice is a product obtained from paddy cultivation. When we examine with reference to the second criteria in the case of rice, it is seen that in addition to further processing by the cultivator, 'milling' is done by the millers, which is normally neither done by the producer nor the cultivator. The essential character of paddy has also been changed to 'Rice, which is readily consumable, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant in their application for advance ruling as well as the submissions made by applicant and his authorized representatives during the hearing. We also considered -the issue involved on which advance ruling is sought by the applicant and relevant facts. 10. The transaction relating to the first question sought by the applicant is verified. It is an admitted fact that the activity carried out by the applicant is Rice canvassing commission agent for Rice millers and traders and selling of Agricultural Produce (Rice) as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. 10.1 The term agent has been defined under sub-section (5) of section 2 of the CGST Act as follows: agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; 10.2 In the instant case, the applicant is engaged in providing the services of Commission Agent' for rice millers and traders, where in applicant is of the opinion that the said transaction falls under entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/product. (iv) Such initial processing to render the product marketable. In the instant case the product viz., rice is a product of milling process involving de-husking, steaming, de-browning, polishing, sorting etc. of paddy, which is a produce out of cultivation of plants. Thus, both rice and paddy are produce out of cultivation of plants. But rice and paddy are not the same as rice is the outcome of milling process of paddy. While rice is readily consumable, paddy when subjected to milling processes yield rice, husk and rice barn. Milling process is not normally done by the paddy producer or cultivator, but is undertaken by the millers. Milling process also changes the essential characteristics of the produce from paddy to rice, which are both distinctly identifiable and separately marketable commodities. Thus, the criteria (ii), and (iv) above are not satisfied in the instant case, in as much as the processing is not done by the cultivator or the producer and the essential character of the produce has also undergone change. Therefore, rice cannot be treated as agricultural produce in terms of para 2(d) of the said Notification, and the commission agent services for sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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