TMI Blog2023 (3) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... CT(R) dated 28 th June, 2017. Similarly, the said services rendered by the applicant can be classified under the services related to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or agriculture produce by way of (a) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing. And (c) Processes carried out at agricultural form including tending, pruning, cutting, harvesting, drawing, cleaning, trimming, sun-drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agriculture produce but make it only marketable for the primary market which are nil rated and notified at Sr. No. 54 of the notification no. 12/2017 -CT(R) dated 28th June, 2017. Thus, the supply of spraying services undertaken by the Applicant is covered under Notification No. 12/2017-CT and hence, exempted from payment of tax - question of availment of input tax credit do not arise, as supply is exempt. - HR/HAAR/03/2022-23 - - - Dated:- 2-12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealers/distributors may sell the same in retail packages of 100 ml to their customers/farmers. Besides the Applicant supply the services of spraying agrochemicals to the farmers. The spraying of the agrochemicals is undertaken on the crops at the agricultural farm for the protection of the crop produce and such service is provided to the farmers directly. The applicant has elaborated the matter as following:- (i) Agrochemicals The agrochemicals play a vital role in reducing crop loss from a range of insects, herbs, fungus, nematodes, rodents, pests etc. It helps in improving the yield and farm income of the farmers. The agrochemicals are used for controlling disease, insects and weeds in the crop produce. They need to be applied to plants and soil in the form of a spray. The main function of a sprayer is to break the chemicals into droplets of effective size and distribute them uniformly over the agricultural land which needs to be protected. The agrochemicals include herbicides, fungicides and insecticides which help to (a) reduce competition from weeds to the crop (b) minimize the effects of fungal diseases, (c) control the infection spread from various kinds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration or consideration is provided to the dealers/distributors. (g) For undertaking the spraying service, the Applicant imports the spraying machines from Japan and pays the applicable IGST under Integrated Goods and Services Tax Act (hereinafter referred to as IGST Act ). The ownership of the machines belongs to the Applicant and the operating cost of the spraying machine i.e. driver's salary, fuel, repair and maintenance, depreciation is also borne by the Applicant. The farmer pays a consideration for the spraying services procured by it from the Applicant. Submissions made by the applicant on the legality of the issue at hand; The Applicant states that the activity related to spraying of agrochemicals provided by him to the farmers is covered under Sr. No. 54 of the Notification No. 12/2017- CT and under Serial No. 57 of the Notification 9/2017- Integrated Tax (Rate) dated 28.06.2017, as amended (hereinafter referred to as Notification No. 9/2017-IT ). The relevant provisions are as under:- (a) Determination of Supply of goods and services As per Section 9 of CGST Act, tax is levied on all intra-state supply of goods or services or both, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... praying services from the Applicant. The only role of the distributors/dealers is to supply the agrochemicals to the farmers, thus, it is clear that the supply of agrochemicals by the Applicant to the distributors/dealers is independent of any spraying service that may/may not be provided by the Applicant to the farmer directly for consideration. Separate invoices are issued by the Applicant for the supply of goods (to dealers/distributors) and the supply of services (to farmers). The farmer has to approach the Applicant separately to avail the spraying services from it and the same is under a separate and independent arrangement between the Applicant and the farmer . It is pertinent to mention here that the recipients in both the supply i.e. the supply of agrochemicals and supply of spraying services are different. Both the supplies are independent of each other and have no correlation with each other. (b) Levy of GST of the supply From above, it can be said that the service of spraying agrochemical as provided by the Applicant to the farmers is an independent supply of services under the CGST, HGST as well as IGST Act, 2017. The spraying services is provided to farmers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NIL NIL In order to fall under the above entry, the service should be covered under Heading 9986. In this regard, it is submitted that as per the Explanatory Notes to the Scheme of Classification of Services adopted for the purposes of GST, the spraying service as provided by the Applicant is covered under the heading 998611 i.e. Support services to crop production. This service code includes: i. services to improve the propagation quality of the seed, including treatment of genetically modified seeds; removal of non-seed materials, undersized, mechanically or insect-damaged and immature seeds; removal of seed moisture to a safe level lor seed storage; drying, cleaning, grading and treating of seeds to be marketed; ii. Post-harvest crop services such as preparation of crops for primary markets, cotton ginning services: iii. Other support services to crop production like tilling of fields preparatory to planting: planting, cultivation and fertilization of crops; spraying , including from the air; iv. pest control for agriculture ; trimming of fruit trees and vines; transplanting and thinning of crops; harvesting; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all life forms of animals. The crops on which spraying services is carried out is produced from cultivation of the crops which are in nature of plants. ii) The second condition is that cither no further processing is done, or such processing is done as is usually done by a cultivator or producer on the said produce. The process of spraying agrochemicals is undertaken as per the requirement and conditions stipulated by the cultivator or producer or farmer. At this stage it is pertinent to mention that the farmers can also undertake spraying on their own. However, in order to ensure efficient spraying with minimal wastage and optimum results, such services are provided by the Applicant to the farmers. The Applicant is merely an agent in present case. So, it can be said that the spraying of agrochemicals is done on behalf of the cultivator or producer at the agricultural farm. c) The third condition is that the process undertaken does not alter its essential characteristics but makes it marketable for primary market. The spraying services are usually carried out to protect the crop from being infected by insects, weeds, herbs etc. The spraying services are directly related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules made thereunder. Whereas the Hon'ble Supreme Court in the case of CIT v. Raja Benoy Kumar Sahas Roy (AIR 1957 SC 768) has held that the agricultural operations are of two types (1) Basic operations which include cultivation of the land and consequently tilling of the land, sowing of seeds, planting and all such operations that require the human skill and effort directly on the land itself and (ii) Subsequent operation which includes operations that are carried out for growth and preservation of the produce like weeding, digging soil around the crops grown etc. and those operations which would make the product fit for use in the market like tending, pruning, cutting, harvesting, etc. Further, the Hon'ble Supreme Court also held that agricultural operations in the wider sense comprise within its scope the basic as well as the subsequent operations, regardless of the nature of the products raised on the land. The principles which emerge from the case of C.I.T. v. Benoy Kumar (supra), has been laid down by the Hon'ble Supreme Court in the case of Maheshwari Fish Seed Farm v. T. Nadu Electricity Board and Ors. (2004 (4) TMI 632-SC) On the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely, the Applicant is of the view that the said spraying services also fall under Sr. No. 54, clause (c) of Notification No. 12/2017-CT and Sr. No. 57 of the Notification No. 9/2017- IT. Clause (c) is as under: (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market. In order to fall under said sub-clause, following conditions are requisite: (a) Service should be directly related to cultivation of the agricultural produce; (b) The processes should be carried out at an agricultural farm; (c) The operations should be in the nature of tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations. (d) The essential characteristics of agricultural produce should not be altered. (e) The service should make the agricultural produce marketable for the primary ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the Applicant also fulfil this condition. The fifth condition is that the services should make the produce marketable at the primary market. In this regard, reliance in this regard is placed on the case of M/S. SHRI SAI PEST CONTROL (supra), wherein it was held that the term 'primary market' is understood as a platform or a place, like a mandi, where the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters, etc. Thus, the spraying services as provided by the Applicant to the farmers are for plant protection and undertaken at the agricultural farm while the crop is standing. The agrochemicals are essential to protect the crop from being infected by insects, weeds, rodents, fungus etc. The spraying services are directly related to the agricultural production and cultivation process and help the crop produce to attain the desired quality for the primary market. The said activity does not alter the essential characteristics of the agricultural produce. It only protects the crop and makes it suitable for consumption and marketable for the primary market. It is abundantly clear that the service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority. The matter was examined by the authority and further a notice was issued to the applicant on 22.09.2022 vide which he was advised to submit the bills raised by him to the farmers/agriculturalists. Secondly, the list of agrochemicals manufactured by the applicant was also sought. Thereafter, the applicant submitted the requisite details on 16.11.2022 which is as under:- Sr.No. Particulars Details and Annexure No. 1 Name and nature of the crops on which spraying of agrochemicals services is provided by us. The crops on which agrochemicals are sprayed: Wheat, Sugarcane, Corn (Rabi), Cotton (Kharif) Besides the applicant has submitted a list of agro chemicals manufactured by him and the images of the spraying machines along with the sample invoices raised by him to the farmers for providing the services of spraying of the manufactured agrochemicals. And the Jurisdictional Officer of the Applicant has not submitted any comments on the matter. DISCUSSION AND FINDINGS: The matter has been perused by the Authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricts all other further processes on the Produce for further sale to be termed as agriculture produce. Once the products attains its first marketability for the primary market all other subsequent processes or produce leading to value addition and subsequent sale belong to the realm of secondary market thereon refraining the produce to fall under the category of Agricultural produce as defined in the Notification. Meaning thereby that any support services to be rendered to the agriculturist which helps in producing the crop which is fit for the primary market. The term Primary market has not been defined under the GST Act. It is understood in common parlance as a platform or a place, like a mandi, where the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters, etc. It means that the services related to the cultivation of plants including support services as may be required till the farmer disposes the agricultural produce in the primary market. All the services and processes beyond the realm of the primary market are excluded from the exemption. In brief, it can be said that Agriculture Produce as per the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the agricultural process. e. Agriculture extension:- Agricultural extension means application of scientific research and knowledge to agricultural practices through farmer education or training. Agricultural extension is another name for agricultural advisory services. In practical terms, extension means giving farmers, the knowledge of agronomic techniques and skills to improve their productivity, food security and livelihoods. In the present matter, the applicant's supply of services of spraying in the fields is not part of agriculture extension. f. Support services related to agriculture Basically support services means any support in relation to the use of, and the identification and resolution of problems in the hosted services, but shall not include the provision of training services. These services are processes that professionals use to execute a core program and functions that generate revenue. Further, Agricultural support services means the aerial or surface application of seed, fertilizer, pesticides or soil amendments and custom harvesting. The relevant entry with reference to the Support services to crop production is SAC 998611 which state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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