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2021 (12) TMI 722 - AAR - GSTBenefit of exemption from GST - Services of ‘Commission Agent' for rice millers and traders - Supply of services which pertains to selling of agricultural produce as per APMC Act - Is there any special case where the applicant has to collect GST on the Service provided (Branded and unbranded)? - paragraph 2 (d) of Notification No. 12/2017 - Central Tax (Rate) dated 28-6-2017 - HELD THAT:- 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. 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 at Si No. 54 of the Notification No12/2017-C.T. (Rate), dated 28.06.2017, and exempted from levy of GST. Clauses (a) to (f) of S1 No. 54 cover the services relating to agricultural operations, 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 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 sale or purchase of rice does not fall in the ambit of SI.No. 54 of the Notification 11/2017-CT(Rate) dtd 28.06.2017 and therefore not eligible for any exemption from levy of GST. The services by a commission agent should be directly linked to the services relating to the cultivation and this is made amply clear by the use of the words “by way of which links the cultivation process and the marketing process. The applicant is not assisting the cultivators of paddy, instead is assisting the manufacturers of rice/rice millers and traders, and hence the link is not established in this case. Hence the activity of the applicant is not covered under clause (g) of Entry No.54 of Notification No.12/2017- CT (rate) dated 28.06.2021 and hence is not exempted - the activity of the applicant in the instant case viz., the activity of canvassing for Rice as 'Commission Agent' is covered under SAC 9961. Further, the applicant is only charging service charges and not issuing sale invoices on behalf of the principals. Hence the activities of Commission Agent by canvassing for Rice by the applicant attracts Central Tax-CGST @ 9% and KGST @ 9% towards marketing of ‘Rice' including 'branded Rice' also. It is pertinent to note that the applicant is providing the marketing service for Rice millers and traders supplying both branded and unbranded rice on a commission basis, the activities rendered by the applicant is taxable in terms of the provisions of CGST/KGST Act - hence the applicant is required to register in terms of section 22 of CGST Act, 2017 and is also required to discharge -CGST @ 9% and KGST @ 9% for which commission is received.
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