28.12.2021 – Turmeric not agricultural produce, but 5% taxable spice: GST-Maharashtra AAR

Turmeric not agricultural produce, but 5% taxable spice: GST-Maharashtra AAR

Mumbai: The Maharashtra bench of the GST-Authority for Advance Rulings (AAR) has held that turmeric is a ‘spice’ that would be taxable at 5%. Recently, the bench was approached to determine whether turmeric would be exempt as an ‘agriculture produce’. However, the GST-AAR bench gave its ruling as the whole turmeric had been cleaned by boiling and later dried and polished by farmers prior to its sale.
This is contrary to a ruling given by the Gujarat bench. Further, on the flip side, the Karnataka bench had recently held eggs (in their raw form) to be agricultural produce and, hence, exempt from GST.

In the latest case, the applicant Nitin Bapusaheb Patil was a commission agent, recognized under the state’s Agricultural Produce Market Committee (APMC) rules. His role was to conduct an auction under the supervision of an APMC officer and in the presence of farmers and traders. If the price obtained at the auction was accepted by the farmer, he continued to act as the intermediary and facilitated the delivery of the dried and polished whole turmeric. For such services, he got a fixed commission of 3% from the traders, according to the APMC rules. Further, in his application to the AAR, he sought to know whether his ancillary services would also be exempt from GST.

According to notification No. 12/2017 dated June 28, 2017, agricultural produce means any produce out of cultivation of plants and rearing of all life forms (except horses) for food, fibre, fuel, raw material or other similar products. The notification also requires that no further processing should be done on such items, or processing which is done by the cultivator or producer should be such that it does not alter the essential characteristics of the produce but makes it more marketable for the primary market.

The applicant relied on various judicial and quasi-judicial precedents. He quoted the Supreme Court which, in two cases, had held that in case of certain agricultural products, some cutting or processing is required to make it marketable. If it is minimal and does not result in transformation of the product, it would remain agriculture produce.

However, the GST-AAR bench held that the applicant had failed to prove that the specialized process of boiling, drying and polishing that required use of machines was carried out by the farmers on their own land. It was not ‘fresh’ turmeric and would be taxed at 5%. Consequently, the services provided by the commission agent would also be taxable.

SOURCE: Time of India


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