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TMI Blog2023 (5) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling seeking to know whether Purchase of raw cotton from Kacha Arhtiya, who is a registered taxpayer, constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of sub-section (3) of section 9 of CGST/PGST Act, 2017, B. Order of the Authority for Advance Ruling: Relevant extract of the order No. AAR/GST/PB/30 dated 10th of November, 2022 issued by the Punjab Authority for Advance Ruling (for brevity, "AAR") is reproduced hereunder: "The applicant is liable to pay GST under reverse charge basis being a registered person in terms of Notification no, 13/2017-CentraI Tax(Rate) dated 28th June, 2017 as amended vide notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017 and not the Kacha Arhtiya." C. Submission of the appellant: (i) The appellant herein purchases raw cotton from Kacha Arhtiyas, who issues Form-I (under Agricultural Produce Marketing Committee Act (APMC Act)) on behalf of the agriculturists. Form-I is issued in the name of the Kacha Arhtiya detailing wherein the quantity of raw cotton (Narma) and the incidental charges. The payment is also made to Kacha Arhtiya in his account through banking channels. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate) dated 14th November, 2017 where the raw cotton (narma) is being procured by the appellant from the Kacha Arhtiya. The question to be answered is who shall be liable to pay tax through Reverse Charge Mechanism (for brevity, "RCM") where the raw cotton is being supplied by the farmer through the Kacha Arhtiya to the appellant. 2. It is pertinent to mention here that the AAR in its order has given reference to the Notification No. 13/2017-Central Tax(Rate) dated 28th June, 2017 as amended vide notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017 which is not the correct notification for the purpose of issue under consideration. The Notification No, 13/2017-Central Tax (Rate) dated 28th June, 2017 was issued for notifying the services that would be subject to RCM under sub-section (3) of section 9 of the CGST Act. The Notification No. 4/2017-Central Tax (Rate) dated 28th June, 2017 was issued for notifying the goods that would be subject to RCM under sub-section (3) of section 9 of the CGST Act. The said notification was further amended by Notification no, 43/2017-Central Tax (Rate) dated 14th November, 2017 which is germane to the issue under consideration. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and "registered person" have been defined in the CGST Act and it would be useful if the same are reproduced here for reference. 8. As per clause (105) of section 2 of the CGST Act, "supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied The important point to be noted here is that an agent acting on behalf of the supplier in relation to goods or services or both supplied is also covered within the ambit of supplier. So, the ambit of supplier has been extended to bring the "Agent" within the cover of supplier provided he/she is acting on behalf of the supplier in relation to relation to goods or services or both supplied. 9. Further, as per Clause (7) of section 2 of the CGST Act "agriculturist" means an individual or a Hindu Undivided Family who undertakes cultivation of land (a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family. So, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 43/2017-Central Tax (Rate) dated 14th November, 2017. 14. As submitted by the appellant, the appellant purchases raw cotton from Kacha Arhtiyas and the payment is also made to Kacha Arhtiya in his account through banking channels. Thereafter, as per the submission of the appellant, the Kacha Arhtiya transfers the amount to agriculturist after deducting its commission. Since the element of commission has been identified by the appellant in the said transaction which flows from the farmer to the Kacha Arhtiya, the question of kacha arhtiya as an agent of the farmer or the agriculturist needs to be looked into. This is also important for determination of the supplier and recipient in the transaction as it has been detailed above that both the definitions of "supplier" and "recipient" include agent acting on their behalf in relation to the supply of goods or services. 15. 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 ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule I of the CGST Act. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal." 17. The above para clearly brings out the fact that an important determinant of defining the nature of principal -agent relationship in context of supply under GST is whether the invoice to the customer consumer is being issued by the agent in his own name or otherwise. Where the invoice to the customer is being issued by the agent in his own name then there would be two supplies i.e. one from the principal to the agent and another from the agent to the customer. However, where the invoice to the customer is being issued by the agent in the name of the principal then there would be only one supply i.e. from the principal to the customer. This is an important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable supply of goods or services on behalf of principle in a situation where such agricultural produce is not exempted. This circular does not talk about RCM liability at all which is covered under Notification No. 4/2017-Central Tax (rate) dated 28th June, 2017 (as amended) vide Entry No. 4A provides that in case of supply of raw cotton supplier of goods being agriculturist the liability to pay GST will arise on recipient of supply in case such recipient is a registered person. For interpretation of this notification it is necessary to see who is supplier of goods and in terms of Section 2(105) supplier includes it is an agent, therefore, Kacha Arhtiya, by virtue of being an agent of the agriculturist steps into the shoes of supplier of goods and registered person receiving such goods is liable for discharge of tax under RCM liability. 20. Schedule Il to the CGST Act, 2017 specifies the activities or transactions which are to be treated as supply of goods or services. This Schedule is aimed at enumerating as to which supplies under the Act will be treated as supplies of goods and which supplies will be treated as supply of services under the CGST Act, 2017. In the said Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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