TMI Blog2019 (10) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... t in terms of para 3 of Schedule I to CGST Act and also whether the applicant is involved in taxable supply or not? - HELD THAT:- In the instant case the applicant sells the goods i.e. dry chillies on behalf of the principal, issues invoice to the buyer/trader in his own name, receives commission as per APMC Act of the State of Karnataka. Therefore the applicant has the authority to pass the title of the goods on behalf of the principal to the buyer, as the invoice is raised in their own name and hence qualifies to be an 'agent' in terms of para 3 of Schedule I to the CGST Act and also in terms of definition under Section 2(5) of CGST Act 2017. Whether the applicant is involved in making taxable supply or not? - HELD THAT:- In the instant case the principal i.e. farmer is not a taxable person and hence the applicant is not involved in supply of goods of another taxable person (farmer). Therefore the applicant does not fall under the category of persons to be compulsorily registered under Section 24(vii) of the CGST Act 2017. However the applicant is liable to get registered under Section 22(i) of the CGST Act 2017. Whether dry chilli qualifies to be 'agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above question is affirmative, then under which section the Commission Agents are to be registered? c) Whether the notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended and Notification No. 9/2017 -Integrated Tax (Rate) dated 28.06.2017 - Serial No. 54(g) issued under section 11 of the CGST Act is applicable to Commission Agents of APMC? d) If the answer to the above question is negative, then to whom does this Notification No.12/2017 - Central Tax (Rate) dated 28.06.2017 as amended and Notification No.9/2017 -Integrated Tax (Rate) dated 28.06.2017 - Serial No. 54(g) issued under section 11 of the CGST Act is applicable and under what circumstances the aforesaid notification is applicable? e) Whether the Dry Chilly is covered under the definition of agriculture produce? f) If the answer to the above question is negative, then what kind of produce the dry chilly is? What is the HSN Code of Dry Chilli and what is the rate of GST on Dry Chilli? 4. The Applicant submits their understanding of the law, with regard to the questions raised, inter alia stating as under: 4.1 The applicant states t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule I of No.3(b) due to the following reasons:- (a) The applicant docs not fix the price or consideration for the dry chilli instead the price or consideration is fixed by the traders through the process of tenders and if the farmer is satisfied with the price for his agricultural produce then only the farmer will sell off his agricultural produce and in this price fixation, the commission agent will not have any role to play and for the activity of rendering the above mentioned service, the commission agent will charge only 2% of commission from the trader. (b) The commission agent does not maintain the inventory or stock of dry chillies since the trader will take the delivery of dry chillies on the same day from the commission agent. (c) The applicant cannot be considered as the owner of the dry chillies obtained from the farmers since the dry chillies are delivered on the same day to the traders and hence the ownership, risk and rewards of the dry chillies (agricultural produce) will get transferred to the traders on the same day. 4.5 The Applicant submits that by taking into account the above mentioned points, it can be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it marketable for primary market . The applicant submits that accordingly from the interpretation of the definition of agricultural produce it may be understood that the dry chillies can also be treated as an agricultural produce since the dry chillies are a produce out of cultivation of plants and a further processes such as drying and sun drying is done as is usually done by the cultivator or producer which does not alter its essential characteristics like usage, odour but makes marketable for primary market (i.e. Agricultural Produce Marketing Committee) and Dry Chillies are notified as agricultural produce by the APMC itself. 4.10 The applicant states by referring to the provision of section 11 of the CGST Act that Central Government has exempted the list of items as notified under section 11(1) of the CGST Act, 2017 and section 6 (1) of the IGST Act, 2017. These items have been exempted from the whole of tax. Since GST is a tax for common man, everyday items used by the common man have been included in the list of exempted goods. 4.11 The applicant also refers to the definition of exempt supply under section 2(47) of the CGST Act, 2017 which def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of their activity under GST Acts. We proceed to examine the activities of the applicant and answer the questions in sequential order. It is an admitted fact that the Applicant is a commission agent involved in the business of receipt of dry chillies from the farmers (principals) and supply of the same to the buyers/traders, on behalf of farmers in the Byadgi A.P.M.C. Market, Karnataka. They are registered under the APMC Act also under the GST Acts. They sell goods (dry chillies) on behalf of principals to the traders, issue invoices to the traders/buyers as prescribed under the APMC Act and also issue sale patties to the principals. They collect commission, on the services provided to the principals, from the purchasers / buyers and the same is also shown in the invoice issued to the purchasers. 6.4 Section 22 of the CGST Act 2017 stipulates the persons liable for registration, in accordance to which every person that makes taxable supply of goods or services or both shall be liable to be registered under the said Act, if his aggregate turnover in a financial year exceeds the threshold limit, prescribed under the Act. Further Section 24 of the said Act relates to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant have been examined and found that the applicant is involved in the following two kinds of supplies.- 1. Supply of goods i.e. dry chillies by the applicant to the trader / purchaser. 2. Supply of services to the farmer (principal) as a commission agent for sale of goods i.e. dry chillies. The supply of goods by the applicant, being commission agent on behalf of the farmer (principal), to the trader / purchaser is a taxable supply in terms the definition as at Section 2(108) of the CGST Act 2017. The goods i.e. dry chillies, are classified under Tariff heading 0904 and are taxable at 5% in terms of SI.No.38 of Schedule I to Notification 01 /2017-Central Tax (Rate) dated 28.06.2017. The applicant has the authority to pass the title of the goods on behalf of the principal to the buyer and also raises the invoice in their own name. Section 23 of the CGST Act 2017 deals with the persons not liable for registration under this Act and Section 23(1)(b) stipulates that an agriculturist is not liable for registration, to the extent of supply of produce out of cultivation of land . In the instant case the principal i.e. farmer is an agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess does not alter its essential characteristics. Hence dry chillies are covered under the term agricultural produce . Even the APMC Act considers them as agricultural produce. 6.11 In view of the above, the Applicant is involved in provision of exempted supply of services to the farmers for sale of dry chillies, an agricultural produce, in terms of entry no. 54(g) of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Further a Circular bearing No.57/31 /2018-GST dated 04.09.2018 has been issued by the Central Board of Indirect Taxes and Customs with regard to the scope of principal-agent relationship in the context of Schedule I of the CGST Act 2017. Scenario 4 in para 8 of the circular is relevant to the instant issue and reads as under:- Scenario 4 Mr. A sells agricultural produce by utilizing the services of Mr. B who is a commission agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr. B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A. As per the APMC Act, the commission agent is a person who buys or sells the agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he buyer, on behalf of principal are exempted under Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. 7. In view of the foregoing, we pass the following RULING 1. The applicant, being a commission agent, is required to be registered under Section 22(1) of CGST Act 2017, as they qualify to be an agent in terms of para 3 of Schedule I to the CGST Act 2017. This answers question numbers 1 and 2. 2. The services provided by the applicant to the principal are covered under services provided by a commission agent for sale or purchase of agricultural produce , which are exempted under entry no. 54(g) of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 and hence the said Notification is applicable to the Applicant, being the commission agent of APMC, Karnataka. However the supply of dry chillies to the traders under the invoice of the applicant is liable to tax as discussed in Para 6.8 supra. This answers question number 3 and 4. 3. Dry Chillies is covered under the definition of agricultural produce, in terms of definition at para 2(d) of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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