2018 (10) TMI 1876 - AAR - GST

Interpretation of statute - storage or warehousing mentioned in clause (i) (e) of the explanation in entry at S.N 24 - includes cold storage, deep freeze storage and controlled atmosphere storage also or not - agriculture produce - taxability - rate of tax - turmeric whole (gattha fait), turmeric powder, red chili (whole), red chili powder, chili seeds - covered under the definition of 'Agriculture Produce' as defined under N/N. 11/2017- Central tax (Rate) dated 28.06.2017 or not. Interpretation of statute - scope of term 'warehousing' as appearing in clause (i) (e) of the explanation in entry at Sr. No. 24 of the notification no. 11/2017-Central Tax (Rate), dated 28.06.2017 corresponding notification no. 46/ST-2 Dt. 30.06.2017 under the HGST Act, 2017 - HELD THAT - Since, the warehousing services are support services and covered in SAC 99672, it includes cold storage, deep freeze storage and controlled atmosphere storage services also unless an exception is provided in the entry - It had also been argued and discussed whether processing done on the agriculture produce by a person other than the cultivator will take away the benefit of nil rate to support services in relation to agricultural produce as per entry no, 24 of the said notification. A plain reading of clause (vii) of explanation 4 to the said notification clearly mention that 'such processing is done as is usually done by a cultivator or producer.' It is immaterial that who does the process as long as the process is such as is usually done by the cultivator or producer which does not alter the essential characteristics of the agricultural produce but makes it marketable for primary market - Turmeric, red chilly in whole are generally marketed in the primary markets and once converted in powdered form these are sellable in the secondary market. Pre-conditioning and pre-cooling processes as mentioned in sr. no, 24 (ii) of the said notification - HELD THAT - It is amply clear that the pre-conditioning or pre-cooling processes are rendered on the agriculture produce at the farm gate before being transported to either the markets or for storage purpose. Therefore, these services of pre-conditioning or precooling processes cannot be regarded as cold storage, deep-freeze or controlled atmosphere storages but the benefit of nil rate on such services shall be available as long as the conditions and restriction as provided under entry 24 (ii) of the said notification are satisfied. Whether the entry 24 (ii) of the said notification also include dry fruits, cut fruits, frozen nuts, processed fruits, and cut vegetables, dried vegetables, processed vegetables and the like? - HELD THAT - The pre-conditioning or pre-cooling processes etc. are usually done at the farm gate on the fresh harvested fruits and vegetables. The category of the products cited by the applicant are such on which certain processing has already been done. Such already processed produce will not require the pre-conditioning or pre-cooling processes to be done again and therefore, to our mind the entry takes in its scope fresh fruits and vegetable only. Understanding the scope of SAC 9967 (supporting service in transport) in relation to the agriculture produce as mentioned at Sr. No. 24 of the said notification - HELD THAT - It is noticed that the benefit of nil rate is provided to only those support services to agriculture which are specifically mentioned at Sr. No. 24 of the said notification. It does not cover the services of transport of agriculture produce and therefore the applicable SAC on such services shall be 9967 irrespective of the service being performed in relation to agricultural produce or any other goods.

Summary

Issues Involved:
1. Classification of storage or warehousing services under GST.
2. Taxability of pre-conditioning or pre-cooling services.
3. Scope of SAC 9967 relating to supporting services in transport.
4. Place of supply of services under IGST Act (not admitted for consideration).

Detailed Analysis:

1. Classification of Storage or Warehousing Services:

A. Inclusion of Cold Storage, Deep Freeze Storage, and Controlled Atmosphere Storage:
The Authority ruled that warehousing services, covered under SAC 99672, include cold storage, deep freeze storage, and controlled atmosphere storage services unless an exception is provided in the entry.

B. Taxability of Services Related to Agriculture Produce:
Not required to be answered in view of the ruling on A.

C. Definition of Agriculture Produce:
The Authority clarified that the definition of "agriculture produce" includes produce out of cultivation of plants and rearing of animals, where processing is done as usually done by the cultivator or producer, which does not alter its essential characteristics but makes it marketable for the primary market. It is immaterial who performs the processing as long as it meets the criteria.

D. Coverage of Specific Items under Agriculture Produce:
The Authority explained that turmeric whole, turmeric powder, red chili whole, red chili powder, and chili seeds are generally marketed in primary markets in their whole form. Once converted into powdered form, they are sellable in secondary markets.

2. Taxability of Pre-Conditioning or Pre-Cooling Services:

A. Inclusion of Cold Storage, Deep Freeze Storage, and Controlled Atmosphere Storage:
The Authority ruled that pre-conditioning or pre-cooling processes are rendered on agriculture produce at the farm gate before being transported to markets or for storage. These services cannot be regarded as cold storage, deep freeze, or controlled atmosphere storages. The benefit of nil rate on such services is available as long as the conditions and restrictions under entry 24(ii) of the notification are satisfied.

B. Taxability of Services Related to Fruits and Vegetables:
Not required to be answered in view of the ruling on A.

C. Scope of Fruits and Vegetables:
The Authority clarified that pre-conditioning or pre-cooling processes are usually done on fresh harvested fruits and vegetables at the farm gate. The entry covers fresh fruits and vegetables only and does not include dry fruits, cut fruits, frozen fruits, processed fruits, cut vegetables, dried vegetables, or processed vegetables.

3. Scope of SAC 9967 Relating to Supporting Services in Transport:

A. Applicability of Service Codes for Refrigerated Storage and Other Storage Services:
The Authority ruled that the benefit of nil rate is provided only to support services to agriculture specifically mentioned at Sr. No. 24 of the notification. It does not cover the services of transport of agricultural produce. Therefore, the applicable SAC on such services shall be 9967, irrespective of the service being performed in relation to agricultural produce or any other goods.

B. Classification of Cold Storage Services:
Not required to be answered in view of the ruling on A.

4. Place of Supply of Services under IGST Act:
The question regarding the place of supply of services by way of cold storage services was not admitted for consideration as it did not fall under the scope of section 97(2) of the HGST/CGST Act, 2017.

Conclusion:
The Authority provided comprehensive rulings on the classification and taxability of storage, warehousing, pre-conditioning, and pre-cooling services under GST. The rulings clarified the scope of "agriculture produce" and the applicability of nil rate tax benefits, ensuring clear guidance on the treatment of such services under the GST regime.