GST Vidhi | GST Advance Ruling

Authority For Advance Ruling - Haryana

Advance Ruling No: HAR/HAAR/R/2018-19/14     Date: 04.07.2018

Name of Applicant: M/S Acsen Hyveg Private Limited

A.   Executive Summary: In this case, the applicant has sought clarification on the obligation to register for the supply of tax-exempt goods under the GST Act while also being liable to pay tax under the Reverse Charge Mechanism (RCM) as per Section 9(3) of the CGST Act, 2017, specifically concerning transportation services for tax-exempt goods. The ruling has been given and clarified that in case the applicant is engaged exclusively in supply of exempted goods ( and also not receiving any taxable services liable to RCM under GST provisions), registration is not required under the CGST Act, 2017, but in this case applicant is receiving services of GTA and no exemption is available for transportation services provided by Goods Transport Agency (GTA) in respect of such goods under Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, the applicant is liable for payment of tax under RCM U/s 9(3) of the CGST Act, 2017 hence applicant is required to take registration

B.   Relevant Sections/Rules & Notification/Circulars on the Subject:

·        Notification 12/2017 Central Tax

·        Section 9(3) of the CGST Act.

C.   Facts and contentions submitted by applicant:

·        M/s Acsen Hyveg Private Limited, Plot No.126, Sector-8, IMT Manesar, Gurgaon-122051, Haryana [hereinafter referred to as the "applicant"), has submitted that they are in business of processing and selling vegetable seeds and cereal seeds through their dealer network under their brand name in different packing sizes. Sales are effected to dealers through C&F agents or own branches located in various States. Processing of seeds are done in their in hour facility in Haryana and Karnataka. That all their packed seeds are meant for sowing purpose only and cannot be used for any human/animal consumption as these materials are treated. That they print this in all their packets under the truthful label; that all their seeds fall under category of seeds for sowing under tariff heading 1209 which falls under zero percent tax slab.

·        It is further submitted that they are engaged in the production and supply of Hybrid seeds vegetable and field crops. They have their own Research and Development setup, with a team of 60+ scientists and technicians, through new technologies in crop improvement so that agriculture becomes easier for the farmer community and saving natural resources. The company has research farms located at various parts of the country, to produce various hybrid varieties of seeds with better resistance and yield. The Company engages contract farming to produce and multiply the seeds and process the same at their processing units and packs and sells those seeds to the farmers for sowing

Process of Seeds:

a)     The Company contracts with the farmers for multiplication of the hybrid seeds.

b)    The Company provides the male and female traits of seeds to the farmers and the seeds are sown.

c)     The seeds / seedlings are given to the farmers for sowing at a cost.

d)    The Field assistants periodically inspect the fields and review the growth of the crops.

e)     The harvested raw seeds are filled in gunny bags in the presence of Field Assistant and are dispatched to the processing unit with the Production advice to Gurgaon or Bangalore as per requirement.

f)      Raw seeds are received from the farmers.

g)     Once raw seeds are received from the farmers, Processing is done at the Manesar and Doddaballapur units.

h)    The processing is done by feeding the seeds into the processing machinery and the machinery separates the good seeds by using gravity separator.

i)       Once the processing is done and Quality check is pass, the seeds are chemically treated and packed.

j)       Once seeds are treated, they are ready to be packed and sold. Seeds are packed in different varieties of packets Example in 10 grams packets 20 grams packets, Bulkpacking jars etc.

k)    All the packed seeds are meant for sowing purpose only and cannot be used for anyhuman/animal consumption as these materials are chemically treated.

l)       The party prints this in all the packets under the truthful label.

m)  All the seeds falls under category of Seeds for sowing under Tariff Heading 1209 whichfalls under zero percent tax slab.

·        Sec 23(1)(a) specifically exempts persons engaged in the business of making exempt / nil rate supplies from registration under the Act. This makes it clear that since there are no taxable supplies made by Company, Acsen Hyveg Private Limited unswervingly fall under the definition of the above referred section. All the supplies made by the Company are sowing seeds which are exempt under the act and there are not taxable supplies."

·        As regards RCM, it the worth to note that the Section 24 starts with the wordings, "Notwithstanding anything contained in sub-section (1) of Section 22", therefore Sec. 24 overrides sec 22(1) and not Sec 23.

Sec 23 is independent of Sec 24 and also Sec 24 does not override Sec 23. Hence the liability under Reverse Charge mechanism does not mandate the registration under Sec 24.

Further"Entry 21 of the exemption list in notification no. 12/2017-CT(rate) exempts services provided by a goods transport agency, by way of transport in a goods carriage of-

(a)              agricultural produce

(b)             ------------------

Services provided by a GTA, by way of transport of seeds being agricultural produce is also exempted from GST as the goods are agricultural produce. The agriculture produce is carried from fields of the farmers to the Processing units and later transported from processing units to the C & F Agents or the Distributors for further onward sale to farmers for sowing. Hence reverse charge on such transportation is also not applicable. Hence with the above Submissions, the Company has filed this Advance Ruling Application to know whether the registration is actually required under the act or not and whether there is any requirement to discharge any liability under reverse charge mechanism towards transportation of the seeds from agricultural fields to the processing units / transportation of the goods from processing units to the selling points.

D.   Question Raised before AAR:

1.     Whether registration is required in case of supply of tax free goods under GST Act?

2.     Whether assessee is liable to pay tax under RCM u/s 9(3) of CGST Act,2017 for transportation services for transporting tax free goods?That if reply to query number (ii) is negative, whether registration is required under GST Act?

3.     Whether registration is required under GST Act, 2017 for interstate supply/sales of tax free goods?

4.     Whether GST registration can be surrendered if we are not liable to pay RCM us 9(3) of CGST Act 2017 and not liable to be registered under GST Act?

E.   Discussionand Findingsof the Authority:

·        Whether registration is required in case of supply of tax free goods under GST Act?

As per Section 23(1)(a) of CGST Act, 2017, any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the integrated Goods and Service Tax Act shall not be liable to registration subjected to requirement in other section of the Act.

Therefore, when the person is engaged in supply of exempted goods or services or both, which are not liable to be taxed, then such person shall not be liable to be registered under Act.

·        Whether assessee is liable to pay tax under RCM for transporting tax free goods:

As per section 24 of the CGST Act, 2017, any person who is liable to pay taxes under reverse charge mechanism would be required to take compulsory registration under this Act. The recipient of goods and/or services is required to pay taxes under reverse charge mechanism on receipt of specified services as specified. Though there are certain goods as specified in the notification in respect of which no tax is payable by the recipient for services under reverse charge mechanism as recipient of services.

As per Entry No. 21 of Notification No 12/2017-CTR as amended time to time, only services provided by a goods transport agency, by way of transport in a goods carriage of certain goods as transported are exempted which are defined below:-

Services provided by a goods transport agency, by way of transport in a goods carriage of –

 (a) agricultural produce;

(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty;

(d) milk, salt and food grain including flour, pulses and rice;

 (e) organic manure;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or

(h) defence or military equipments

Agriculture produce has been defined under Para 2 (d) of Notification No.12/2017- Central Tax (Rate) dt.28.06.17, as 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 usuallydone by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.

As regards the goods supplied by the applicant, the same are seeds which are covered under chapter heading 1209 of the first schedule to the Customs Tariff Act, 1975. As per the list of activities undertaken by the applicant, the harvested raw seeds are dispatched to the processing unit with the Production advice to Gurgaon or Bangalore as per requirement, where the seeds are processed with machines, quality checks are done thereafter the seeds are chemically treated and packed. Such chemically processed and treated seeds can no more be regarded as agriculture produce in terms of Para 2 (d) of the Notification No.12/2017- Central Tax (Rate) dt.28,06.17.

Further,As per Section 24(1)(iii) of the CGST Act. 2017, person required to pay GST under reverse charge mechanism is required to obtain registration under the Act,

As per Notification No. 13/2017-Central Tax (Rate) Serial No. 1 Column 4(a) & (e), a recipient who is "Any Factory registered under or governed by Factories Act, 1948 and any body corporate established by or under any law, are liable to pay tax under RCM if he is receiving services of transportation of Goods from a GTA (Goods Transport Agency).

Therefore, the applicant is required to pay GST under reverse charge mechanism In case of transportation services received for transporting the aforesaid goods from a Goods Transport Agency (GTA).

·        Whether registration is required under GST Act, 2017 for Interstate supply/sales of taxfree goods:

Section 23 of CGST Act, 2017 provides that any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act shall not be liable to registration. Therefore, in case the applicant is engaged exclusively in supply of exempted goods [and also not receiving any taxable services liable to RCM under GST provisions], registration is not required under the CGST Act, 2017.

F.    Ruling By AAR:

1.     Whether registration Is required in case of supply of tax free goods under GST Act? Person is engaged in supply of exempted goods or services or both, which are not liableto be taxed, shall not be liable to be registered under the CGST Act, 2017.

2.     Whether assessee is liable to pay tax under RCM U/S 9(3) of the CGST Act, 2017 for transporting tax free goods:

As no exemption is available for transportation services provided by Goods Transport Agency (GTA) in respect of such goods under Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, the applicant is liable for payment of tax under RCM U/s 9(3) of the CGST Act, 2017.

3.     Whether registration is required under GST Act, 2017 for Interstate supply /sales of tax-free goods?

In case the applicant is engaged exclusively in supply of exempted goods ( and also not receiving any taxable services liable to RCM under GST provisions), registration is not required under the CGST Act, 2017.but in this this case applicant is receiving services of GTA and no exemption is available for transportation services provided by Goods Transport Agency (GTA) in respect of such goods under Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, the applicant is liable for payment of tax under RCM U/s 9(3) of the CGST Act, 2017 hence applicant is required to take registration.

4.     Whether GST registration can be surrendered if we are not liable to pay RCM U/s 9(3) of CGST Act 2017 and not liable to be registered under GST Act?

In case the applicant availed services of GTA for transportation of goods, they would be liable to pay GST under RCM u/s 9(3) of the CGST Act, 2017 consequently they will be liable to be registered under the CGST Act, 2017.

G.  Author’s Comments:

Taking an overview, if the applicant is solely involved in the supply of exempted goods and is also availing transportation services subject to the Reverse Charge Mechanism (RCM) under GST provisions, with no exemption applicable to transportation services provided by Goods Transport Agency (GTA) concerning such goods, as per Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, the applicant is obligated to pay tax under RCM as per Section 9(3) of the CGST Act, 2017. Consequently, registration is required for the applicant.