GST on Trading of Agriculture Produce
Introduction: In India agriculture sector is always treated as special priority sector; and therefore, under GST law also there are some of the provision which are worth noting. What will be the rate of GST on agriculture produce, what are the exemption which are provided in relation to agriculture sector, what is the registration threshold in relation to person carrying on agriculture activity. Let take a look at all the GST provision which are affecting agriculture sector in India.
- Agricultural produce: The agriculture produce means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.
It is cleared from definition that
i) Rearing of horses is not covered under above definition.
ii)No processing shall be done on such produce and if it is done it shall be done only by cultivator or by producer.
iii) After carrying such process, it shall not alter its essential characteristics.
iv) After carrying such process, without altering its essential characteristics it marketable only for primary market.
- Agriculture extension: The agricultural extension means application of scientific research and knowledge to agricultural practices through farmer education or training.
- Agricultural Produce Marketing Committee or Board: It means any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce.
- Agriculturist: Agriculturist means an individual or a Hindu undivided family who undertakes cultivation of land. a) by own labour b) by the labour of family 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. Therefore, it is cleared that agriculture activity by any persons other than Individual and HUF is kept out of the definition of agriculturist.
Registration:Only an agriculturist, to the extent of supply in relation to produce out of cultivation of land is exempt from GST registration requirement.Any person who operate as a company or LLP or any other type of entity is not covered under definition of agriculturist and therefore, they would be required to obtain GST registration if the aggregate turnover exceeds the exemption limit or they met one of the condition specified under section 24 of CGST Act, 2017. (Compulsorily required to get registration).
Time of Supply, Value of Supply, Place of Supply: There is no special provision in relation to any of the three normal all the normal provisions are applicable as it is. However, it is important to know the various exemption provided in relation to services relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce.
- Carrying Job work or any process or service in relation to agriculture or agriculture produce is not taxable is covered under exemption and therefore, will be treated as exempted supply of service.
- Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables is exempted vide Notification No.12/2017-Central Tax(Rate).
- Service provided by Goods Transportation agency (GTA) in relation to transport of goods being agriculture produce is exempted vide Notification No.12/2017-Central Tax(Rate).
- Service by way of loading, unloading, packing, storage or warehousing of rice is exempted vide Notification No.12/2017-Central Tax(Rate).
- Service in relation to supply of farm labour; 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; is exempted vide Notification No.12/2017-Central Tax(Rate).
- Service by way of renting or leasing of agro machinery or vacant land with or without a structure incidental to its use is also exempted vide notificationNo.12/2017-Central Tax(Rate).
- Service by way of Loading, unloading, packing, storage or warehousing of agricultural produce, agricultural extension services and services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce is also exempted vide notification No.12/2017-Central Tax(Rate).
- Activity in relation to fumigation of agriculture produce carried at warehouse is also exempted from the preview of GST.
- Further many of the seeds and fertilizers are exempted from GST therefore, it will not hinder the farmers even if they are not eligible to take credit of the same.
Important issues and Illustrations:
- What is Job work is done by Sortex Machine over agricultural produce?
In that case is such it will not be exempted from GST as only process carried out by cultivator or producer at agricultural farm is exempted vide notification. Such service will attract the rate of 5%.
- Whether consultancy service provided to farmer for their crops is exempted?
Yes. Any such service provided to farmer is covered under support service to agriculture and will be covered under exempted service.
- What is the scenario relating to levy of GST in case Job work has been performed on paddy; What if such has been performed on rice instead of paddy?
Processing on Paddy to convert such into Rice is necessary, without processing paddy into rice it cannot be marketable to the primary market; hence if such processing is carried out by cultivator or producer at agriculture farm to make it marketable then in such case it will be exempted from GST; however if such process is carried out by any other person then in that case it will be taxable. If any process is carried on rice it will be taxable as rice is not considered as agriculture produce; however, Service by way of loading, unloading, packing, storage or warehousing of rice is exempted vide Notification No.12/2017-Central Tax(Rate).
- What will be the rate of GST when goods are supplied through commission agent? What is the registration requirement in such case for commission agent?
Service provided by commission agent for selling of agriculture produce is exempted. Further any such dealer if he is exclusively dealing as commission agent for agriculture produce then in that case h is not required to get the registration as exempted by section 23 of CGST Act, 2017; however if such agent is also dealing in other product then in that case he will be liable to register if he exceeds limit specified under section 22 of CGST Act, 2017.
- Whether sale of pesticides sprayers is exempted from GST?
There is no such benefit provided to the farmers; Therefore, such products are taxable and input tax credit of same will not be allowed to farmers as their end product is exempted.
- What will be rate of GST in case of trading of basmati rice?
Under GST, basmati rice has been included in the category of branded cereals registered in the Register of Trade Marks and therefore it will attract the levy of 5% under GST; Further as now the product has been taxable the supplier will be eligible to take credit in relation to any Inputs/Input service directly attributable to such supply and of capital goods directly attributable to such supply.
Further in case of any common inputs (i.e. Inputs/Inputs service used for both i.e. taxable as well as exempted) are there then it will require the computation of eligible Input Tax Credit as per rule 42 and 43 of CGST Act, 2017