2019 (8) TMI 1629 - AAR - GST

Exempt services or not - applicant is engaged in provision of the Brokerage services/intermediary services in relation to sale and purchase of commodities mainly agricultural produce - applicability of N/N. 12/2017 (CT Rate) dated 28.06.2017 - HELD THAT - The applicant firm Mcdonald Pelz Global Commodities India Private Limited is engaged in provisions of brokerage/ intermediary services in relation to sale and purchase of commodities mainly agriculture produce. The applicant sources the supplier and the buyer and charges brokerage charges from both the parties. The main commodities in relation to which the applicant provides its services are agricultural produce, particularly wheat, maize and pulses. The applicant facilitates the execution of trade but never deals with the goods itself. The applicant has sought a ruling whether the services of the applicant are exempt in light of the exemption Notification No. 12/2017(CT rate) dated 28.06.2017. More precisely, the applicants query is whether the services of the applicant fall under the description of the services covered under point (g) of heading 9986 mentioned at Serial No. 54 i.e. services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. As per the definition contained in Notification No. 12/2017 CT (Rate) dated 28.06.2017, agricultural 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 - The Circular No. 57/31/2018-GST dated 04th September, 2018 elaborately deals with the scope of Principal-Agent relationship discussed. Although this circular defines the Principal-Agent relationship in the context of Schedule I appended to CGST Act but, it throws light on the Principal-Agent relationship in general. It deals with certain scenarios describing as to when a person can be taken to be acting as an agent on behalf of his principal and when not. The applicant merely acts as a facilitator between the buyer and the recipient and charges its brokerage/ commission. It has nothing to do with the goods supplied or received. The nature of services provided by the applicant is identical to scenario 1 discussed above and as such the applicant is not a commission agent in view of the conjoint reading of Section 2 (5) of the CGST Act, 2017 and the CBIC Circular No. 57/31/2018-GST dated 04th September, 2018. It is an intermediary as defined in Section 2 (13) of the IGST Act, 2017. It is worth mentioning here that the term intermediary has not been defined under the CGST Act, but in view of the provisions of Section 2 (120) of the CGST Act, 2017, it has the same meaning as defined in the IGST Act, 2017 - Since, the applicant is not a commission agent, the services rendered by it are not covered under point (g) of the description of services mentioned at Serial No. 54 of exemption Notification 12/2017 CT (Rate) dated 28.06.2017.

Summary

Issues Involved:
Whether the services of the applicant are exempt under the exemption notification 12/2017 (CT Rate) dated 28.06.2017.

Analysis:
The applicant, a private limited company, provides brokerage/intermediary services for the sale and purchase of agricultural produce. The company sources buyers and sellers and charges brokerage from both parties. The main commodities dealt with are wheat, maize, and pulses. The applicant sought a ruling on whether their services fall under the exemption notification 12/2017 for services provided by a commission agent for sale or purchase of agricultural produce.

The applicant argued that they are not acting as agents but as intermediaries facilitating transactions without dealing with the goods themselves. They claimed that their services are not related to the cultivation of plants but merely aid in purchase and sales transactions. The applicant believed that they were liable to charge tax as their services were not covered by the exemption notification.

The discussion highlighted the definitions of agent and intermediary under the CGST Act and IGST Act. The definition of agricultural produce and the circular on Principal-Agent relationship were referenced. The applicant's role was compared to a scenario where a procurement agent does not involve in the supply or receipt of goods directly. It was concluded that the applicant, not being a commission agent, did not fall under the exemption for services by a commission agent for sale or purchase of agricultural produce.

Ruling:
The ruling stated that the services provided by the applicant are not exempt under the exemption notification 12/2017 CT (Rate) dated 28.06.2017. The decision was made accordingly and to be communicated to the applicant.