2022 (9) TMI 366 - AAR - GST

Classification of supply - rate of GST - outward supply - Agricultural Services or not - fruit trees being cultivated and nurtured at marginalised communities - mangroves being cultivated and nurtured at coastal communities - HELD THAT - Agricultural produce , as per serial number 4(vii) of Explanation appended to the said notification 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 usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Whether the aforesaid activities may be treated as support services to agriculture, forestry, fishing, animal husbandry so that such supply of services get covered under serial number 24 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as claimed by the applicant? - HELD THAT - The applicant doesn t provide such services for food, fibre, fuel, raw material or other similar products or agricultural produce rather the sole object of the services as it has been claimed by the applicant is to enhance biodiversity and re-establish ecosystem function to protect the islands and the populace from erosion - such supply of services may be treated as environmental protection services under chapter Heading 9994 and shall not get covered under chapter Heading 9986 being Support services to agriculture, forestry, fishing, animal husbandry . Serial number 32 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 and corresponding West Bengal Notification No. 1135 F.T dated 28.06.2017, as amended from time to time, specifies that tax shall be levied @ 18% on Sewage and waste collection, treatment and disposal and other environmental protection services .

Summary

Issues Involved:
1. SAC Code & GST Rate for the outward supply made by the applicant in the case of fruit trees being cultivated and nurtured at marginalized communities.
2. SAC Code & GST Rate for the outward supply made by the applicant in the case of mangroves being cultivated and nurtured at coastal communities.

Issue-Wise Detailed Analysis:

Issue 1: SAC Code & GST Rate for Fruit Trees Cultivation and Nurturing
The applicant is engaged in the cultivation, planting, and nurturing of fruit trees in marginalized areas, aiming to create sustainable livelihoods and provide nutritious food. The applicant contends that these activities fall under "Agricultural Services" as per Notification No. 11/2017-Central Tax (Rate), under Serial No. 24 with Heading 9986, which has a NIL rate of GST.

The Authority for Advance Ruling (AAR) observed that horticulture, which includes the cultivation of fruit trees, is considered agriculture. The processes involved, such as land identification, nursery setup, and providing resources to farmers, align with agricultural operations directly related to the production of agricultural produce.

Ruling for Issue 1:
The supply of services for the cultivation, planting, and nurturing of fruit trees is covered under Serial No. 24 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, having SAC 9986, and therefore attracts a NIL rate of tax.

Issue 2: SAC Code & GST Rate for Mangroves Cultivation and Nurturing
The applicant also engages in the plantation of mangrove seeds and seedlings in coastal areas to enhance biodiversity and protect against erosion. The applicant argues that these activities should also fall under "Agricultural Services" with a NIL rate of GST.

The AAR, however, noted that the primary objective of the mangrove plantation is environmental protection rather than producing agricultural products for food, fiber, fuel, or raw materials. Therefore, these activities do not fall under "Support services to agriculture, forestry, fishing, animal husbandry" but rather under "environmental protection services."

Ruling for Issue 2:
The supply of services for the plantation of mangrove seeds and seedlings in coastal areas is covered under Serial No. 32 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, having SAC 9994, and therefore attracts a tax rate of 18% (CGST @ 9% + WBGST @ 9% or IGST @ 18%).

Conclusion:
1. The cultivation and nurturing of fruit trees are classified under SAC 9986 with a NIL rate of GST.
2. The cultivation and nurturing of mangroves are classified under SAC 9994 with an 18% GST rate.