2021 (11) TMI 388 - AAR - GST

Classification of goods - eggs / hatcheries - classified under the Agricultural Produces/ Products or not - Applicability of GST on Transportation Services by Rail on Eggs/hatcheries under GST Act - HELD THAT - Eggs, including hatching eggs are obtained by rearing of chicken (Poultry Farming) directly. They are either meant for food or as raw material (hatching eggs) for further propagation, and as per definition of Agricultural Produce, any produce out of rearing of all life forms of animals, 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. Thus fresh eggs in shell on which no further processing is done are covered under the definition of Agricultural Produce. There is no condition in the definition that this has to be done by a certain type of person to qualify for the definition. Since the applicant is involved in providing services of transportation of agricultural produces i.e. eggs, by rail from one place in India to another, those services are hence covered under the entry 20 of Notification No.12/2017-Central Tax (Rate) dated 28-06-2017 and hence such services are exempt by the said Notification from payment of taxes under the CGST Act.

Issues Involved: Classification of eggs/hatcheries under Agricultural Produces/Products; Applicability of GST on transportation services by rail on eggs/hatcheries under GST Act.

Issue 1: Classification of Eggs/Hatcheries under Agricultural Produces/Products

The applicant, engaged in freight services, sought clarification on whether eggs/hatcheries are classified as agricultural produces/products. The relevant notification, No. 12/2017-Central Tax (Rate) dated 28-06-2017, exempts transportation services of agricultural produce from GST. The definition of "agricultural produce" in the notification includes any produce from the cultivation of plants and rearing of animals (excluding horses) for food, fiber, fuel, raw material, or similar products, provided no significant processing is done that alters their essential characteristics.

The Assistant Commissioner of Central Tax, in his comments, argued that eggs and hatchery produce do not fall under the definition of agricultural produce. He emphasized that the notification aims to provide relief to agriculturists/farmers involved in activities like animal husbandry, pisciculture, and sericulture, and not to commercial activities like hatcheries. He pointed out that the definition of "agriculture" in the Finance Act, 1994, includes the rearing of animals for food, but hatchery and egg production appear to be commercial rather than agricultural activities.

However, the Authority for Advance Ruling (AAR) noted that the definition of agricultural produce in Notification No. 12/2017-Central Tax (Rate) should be relied upon rather than definitions from erstwhile acts. The AAR concluded that fresh eggs in shell, on which no further processing is done, are covered under the definition of agricultural produce.

Issue 2: Applicability of GST on Transportation Services by Rail on Eggs/Hatcheries

The applicant also sought a ruling on the applicability of GST on transportation services by rail for eggs/hatcheries. The relevant entry, Serial No. 20 of Notification No. 12/2017-Central Tax (Rate), exempts services by way of transportation by rail or vessel of specified goods, including agricultural produce, from GST.

The AAR examined whether eggs are covered under the term "agricultural produce" for the purposes of the notification. They reiterated that eggs, including hatching eggs, obtained directly from rearing chickens, meet the definition of agricultural produce as they are meant for food or raw material and undergo no further processing that alters their essential characteristics.

Since the applicant provides transportation services for eggs, which are classified as agricultural produce, these services fall under the exempted category as per Serial No. 20 of Notification No. 12/2017-Central Tax (Rate).

Ruling:

a) Eggs on which no further processing is done are covered under the definition of 'Agricultural Produce' as per clause 2(d) of Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017.

b) Services by way of transportation of 'Eggs' by rail from one place in India to another place are exempted as per Serial No. 20 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017.

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