M/S GUJARAT CO-OPERATIVE
MILK MARKETING FEDERATION LIMITED THRU. GENERAL MANAGER (FINANCE) ATULKUMA
Versus
UNION OF INDIA
R/Special Civil
Application No. 8320 of 2019
Court: High Court of Gujarat
Date: 13.12.2019
In a significant legal
tussle concerning the applicability of Goods and Services Tax (GST) on milk
chilling and packing services, the High Court of Gujarat recently delivered a
pivotal judgment in the case of M/S Gujarat Co-operative Milk Marketing Federation
Limited v. Union of India.
Facts of the Case:
The petitioners, led
by M/S Gujarat Co-operative Milk Marketing Federation Limited, challenged
Circular F No.354/292/2018-TRU issued by the Government of India's Tax Research
Unit (TRU). This circular, dated 9th August 2018, clarified that GST applies to
services provided by contractors for chilling and packing milk, categorizing
them under the GST rate of 5%. Prior to this circular, the petitioners had
operated under the belief that such services were exempt from GST under Serial
No.24 of Notification No.11/2017 – Central Tax (Rate).
The petitioners,
comprising cooperative societies involved in milk production and marketing,
argued that milk, being an agricultural produce, qualifies for GST exemption
under the notification. They contended that chilling and packing services are
essential support services to agriculture, as they contribute to the
preservation and marketing of milk produced by farmers.
Submissions by Petitioner:
The petitioners
asserted that milk, derived from animal rearing, falls under the definition of
agricultural produce as per GST regulations.
· They argued that chilling and packing services
are integral to preparing agricultural produce (milk) for marketability, thus
qualifying for GST exemption under the law.
· The petitioners highlighted financial burdens
incurred due to GST payments on these services, which they claimed were
contrary to the government's intent to exempt such crucial agricultural
activities.
Respondent's
Counter-argument:
· The Union of India, through its
affidavit-in-reply, argued that chilling and packing of milk do not directly
involve primary agricultural activities by farmers or producers.
· They cited the GST Council's decisions and
notifications specifying a 5% GST rate on job work services related to food
products, including milk packing.
· The respondent defended the TRU circular as
consistent with GST laws and notifications, asserting that services by job
workers in chilling and packing milk are taxable under the prescribed rates.
Court's Findings and
Judgment:
In a detailed
analysis, the High Court of Gujarat considered the definitions and exemptions
provided under Notification No.11/2017 – Central Tax (Rate). The court examined
whether chilling and packing of milk constitute "support services to
agriculture" as envisaged under GST regulations.
Key Findings:
· The court acknowledged that milk qualifies as
agricultural produce under the relevant GST notification.
· It deliberated on whether chilling and packing
services, though not directly performed by farmers, are essential for making
agricultural produce (milk) marketable.
· The court emphasized a broader interpretation
of "support services to agriculture," concluding that chilling and
packing of milk indeed qualify for GST exemption under the notification.
· It found that the TRU circular's
interpretation was overly restrictive and not aligned with the legislative
intent behind the GST exemption for agricultural support services.
Summary:
The judgment by the
High Court of Gujarat in M/S Gujarat Co-operative Milk Marketing Federation
Limited v. Union of India clarifies the applicability of GST on chilling and
packing services for milk. By affirming that such services qualify for GST
exemption under the definition of support services to agriculture, the court
has provided significant relief to cooperative societies and farmers involved
in milk production. This decision underscores the importance of interpreting
GST laws in a manner that supports agricultural activities and aligns with the
government's policy objectives.
The ruling is expected
to have broader implications for the GST treatment of similar agricultural
support services, providing clarity and relief to stakeholders in the
agricultural sector across India.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
