2023 (5) TMI 1068 - AAAR - GST

Liability to pay GST under reverse charge basis - Kacha Arhtiya or not - registered person in terms of N/N. 13/2017-CentraI Tax(Rate) dated 28^th June, 2017 as amended vide N/N. 43/2017-Central Tax (Rate) dated 14th November, 2017 - appellant contended that a Kacha Arhtiya is not an agriculturist within the meaning of section 2(7) of the CGST Act, 2017 and therefore, is not covered under the notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017.

HELD THAT:- The definition of recipient is primarily attributed to the payment of consideration and the person who is liable to pay such consideration. Where the element of consideration does not come into play, the definition ventures into the aspect of identification of the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available, In the case of services, the same is effected by of identification of the person to whom the services have been rendered. Furthermore, the definition also brings the “agent” within the ambit of recipient where he/she is acting on the behalf of the recipient in relation to the goods or services supplied - As per clause (94) of section 2 of the CGST Act, “registered person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number. So any person who has obtained registration under section 25 of the CGST Act shall be covered by the said definition.

As per clause (5) of section (2) of the CGST Act, “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. The definition of agent includes an arhatia and further postulates that he/she should carry on business of supply or receipt of goods or services on behalf of another. So, in the issue under consideration, the Kacha Arhtiya shall fall within the definition of an agent provided he/she carries on business on the behalf of another i.e. the principal, which in this case would be the agriculturist.

The definition of supplier of goods in section 2(105) of the CGST Act includes his agent and, therefore, Kacha Arhtiya becomes supplier of goods. If a view is taken that supplier of goods is only the agriculturist and not KachaArhtiya, then it goes against the very definition of supplier so also goes against the logic as an agent is working in the capacity of having authority to act on behalf of principal. In other words, an agent enters into the shoes of principal. Thus, for the purpose of the said notification, the expression “agriculturist” would include the agent who acts on the behalf of the said person.

Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services and not goods. It is an accepted position that Kach Arhtiya does not hold title to the raw cotton so supplied to him by the agriculturist. However, from the activities so enumerated in para 3 of this order, he gets the right in goods in respect of receiving, storing, cleaning, grading and finally auctioning of raw cotton which he receives from the agriculturist without getting any title over the raw cotton. Therefore, in terms of above entry of Schedule Il, this transfer is deemed as supply of services for the purpose of CGST Act, 2017.

RCM Notification No. 4/2017-CT dated 28th June, 2017 - HELD THAT:- As is abundantly clear from the notification, RCM liability is in respect of supply of goods and not in respect of services in connection with goods. Hence, the transaction between an agriculturist and that of Kaccha Arhtiya is a transaction involving supply of services and therefore, by no stretch of imagination, it could be covered under RCM Notification No. 4/2017-CT dated 28th June, 2017.

Any interpretation which leads to illogical conclusion has to be eschewed. Therefore, it is clear that by no canon of interpretation, Kacha Arhtiya can be made liable to pay GST in terms of Notification No. 4/2017-CT dated 28th June, 2017(as amended). Moreover, the ultimate objective of RCM is to fix the GST liability on the person who is better organized being engaged in the business of supply of goods and services. Pakka Arhtiya by its very nature of activity is much more organised in the business dealing as compared to Kacha Arhtiya as he is purchasing cotton primarily for trading and hence is having much higher level of business volume and turn over. This also logically leads to fixing the liability of GST on Pakka Arhtiya in terms of sub-section (3) of Section 9 of CGST Act.

Appeal dismissed.