2023 (3) TMI 1252 - AAR - GST

Classification of supply - supply of spraying services undertaken by the Applicant - covered under Notification No. 12/2017-CT, exempt from GST or not - If tax is payable, then whether Applicant can avail input tax credit of inputs and input services used for undertaking supply of spraying services? HELD THAT - The Authority is of view that the services of spraying of agrochemicals provided by the applicant to the farmers is an exempted supply under the Act as he provides the spraying service directly to the farmers and the consideration for such service is paid by farmers to the Applicant. The spraying service is provided at the agricultural land of the farmers during the pre-harvesting period only. The agrochemicals used while providing the spraying service do not alter the characteristics of the crops or the agricultural produce and the activity is undertaken only for crop protection and to make the crop produce suitable for consumption and marketable for the primary market. It is covered under the support services to agriculture as nil rated vide notification no. 11/2017-CT(R) dated 28 th June, 2017. Similarly, the said services rendered by the applicant can be classified under the services related to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or agriculture produce by way of (a) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing. And (c) Processes carried out at agricultural form including tending, pruning, cutting, harvesting, drawing, cleaning, trimming, sun-drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agriculture produce but make it only marketable for the primary market which are nil rated and notified at Sr. No. 54 of the notification no. 12/2017 -CT(R) dated 28th June, 2017. Thus, the supply of spraying services undertaken by the Applicant is covered under Notification No. 12/2017-CT and hence, exempted from payment of tax - question of availment of input tax credit do not arise, as supply is exempt.

Summary

Issues Involved:
1. Eligibility of the applicant for seeking an advance ruling.
2. Taxability of the supply of spraying services provided by the applicant.
3. Eligibility of the applicant to avail input tax credit if the spraying services are taxable.

Issue-wise Detailed Analysis:

1. Eligibility of the Applicant for Seeking an Advance Ruling:
The applicant must satisfy the conditions under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (HGST Act, 2017). Sections 97(2) of the CGST Act, 2017 allow Advance Ruling on questions related to the applicability of notifications, admissibility of input tax, determination of tax liability, and whether an activity amounts to a supply of goods or services. The applicant declared that the issue is neither pending nor decided in any proceedings under the Act, and the applicable fees have been paid. Thus, the applicant is eligible to seek an Advance Ruling.

2. Taxability of the Supply of Spraying Services Provided by the Applicant:
The applicant is engaged in manufacturing agrochemicals and providing spraying services to farmers. The applicant contends that the spraying services fall under Sr. No. 54 of Notification No. 12/2017-CT and Sr. No. 57 of Notification No. 9/2017-IT, which exempt services related to the cultivation of plants.

Determination of Supply:
- Section 9 of the CGST Act levies tax on intra-state supply of goods or services.
- Section 2(54) defines "goods" and Section 2(102) defines "services".
- Section 7(1) defines "supply" as including all forms of supply of goods or services for consideration.

There are two supplies by the applicant:
1. Supply of agrochemicals to distributors/dealers.
2. Supply of spraying services directly to farmers.

Both supplies are independent, and separate invoices are issued for each.

Levy of GST on Supply:
- The spraying services are considered an independent supply of services under the CGST, HGST, and IGST Acts.
- Notification No. 12/2017-CT and Notification No. 9/2017-IT provide exemptions for services related to the cultivation of plants.

Exemption Analysis:
- The service should fall under Heading 9986, which includes support services to crop production like spraying.
- The service must relate to the cultivation of agricultural produce.
- The term "agricultural produce" is defined to include produce from the cultivation of plants that are marketable in their primary form without altering essential characteristics.

The spraying services provided by the applicant meet these criteria as they are directly related to crop protection and do not alter the essential characteristics of the crops, making them marketable for the primary market.

3. Eligibility of the Applicant to Avail Input Tax Credit:
- Section 16 of the CGST Act allows registered persons to take credit of input tax on supplies used in the course of business.
- Section 17 restricts input tax credit to the extent attributable to taxable supplies.

Since the spraying services are exempted, the applicant is not eligible to claim input tax credit for inputs and input services used for providing these services. If the services were taxable, the applicant could claim input tax credit subject to conditions under Section 16(2) of the CGST Act.

Conclusion:
The Authority concluded that the spraying services provided by the applicant are exempt from tax under Notification No. 12/2017-CT and Notification No. 9/2017-IT as they are considered support services to agriculture. Consequently, the applicant is not eligible to avail input tax credit for inputs and input services used for these exempt services.

Ruling:
1. The supply of spraying services undertaken by the applicant is covered under Notification No. 12/2017-CT and hence, exempted from payment of tax.
2. Since the spraying services are exempt, the question of availing input tax credit does not arise.