2024 (2) TMI 1056 - AAR - GST

Classification of supply - composite supply or not - Carbon credit trading - Support services to agriculture, forestry, fishing, animal husbandry as provided in the Sl. No. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017 (as amended time to time) having SAC code 9986 - whether taxable rate applicable would be NIL in term no. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017? - HELD THAT - The appellant's role in carbon credit trading is a complicated legal situation. Resolving this matter requires careful use of legal principles, taking into account all the details of what the appellant is doing within the broader legal and regulatory context resulting in outcome of them not getting the exemption under support services. This legislative interpretation underscores the importance of ascertaining the specific characteristics and nature of carbon credits to determine their GST status accurately. It is pertinent to note that the services said to have been undertaken by the appellant are nowhere in tune with the agricultural support services and are mostly independent activities. The worker or activities undertaken by the appellant as per agreement viz., project during doesn t fall under the support services to agriculture under SI. No.2 4 of Heading 9986 of Notification No. 11/2017-Central Tax(Rate), dated 28th June, 2017.

Summary

Issues Involved:
1. Whether the activities of the applicant under the agreement qualify as 'composite supply' under GST law with principal supply as "Support services to agriculture, forestry, fishing, animal husbandry."
2. If affirmative, whether the applicable taxable rate would be NIL in terms of serial no. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017.

Summary:

Issue 1: Composite Supply Qualification

The applicant, M/s. Archipel India Foundation, entered into a Project Development Agreement with M/s. Shell Energy India Private Limited (SEIPL) to implement a project involving Afforestation, Reforestation, and Revegetation (ARR) for sustainable agriculture and land management. The project aims to increase productivity of privately held agricultural lands in Andhra Pradesh, covering approximately 23,000 hectares and 20,000 farmers.

The applicant argued that their activities qualify as "Support services to agriculture, forestry, fishing, animal husbandry" under SAC code 9986, as per Notification No. 11/2017-Central Tax (Rate). They submitted that their activities, including project design, raising nurseries, procuring saplings, and monitoring, are essential for agricultural operations and should be considered as composite supply with the principal supply being support services to agriculture.

The Authority for Advance Ruling (AAR) examined the nature of the applicant's activities and found that the activities required for achieving the project objectives, such as project design, carbon accounting, validation, monitoring, and reporting, are not purely agricultural activities. The AAR noted that the applicant's involvement in carbon credit trading indicates a significant commercial operation, which does not align with the definition of support services under SAC code 9986.

Issue 2: Taxable Rate Applicability

Given the findings on Issue 1, the AAR concluded that the applicant's activities do not qualify as "Support services to agriculture, forestry, fishing, animal husbandry" under SAC code 9986. Consequently, the question of whether the taxable rate would be NIL under serial no. 24 of Notification 11/2017-Central Tax (Rate) does not arise.

Ruling:

1. The activities of the applicant under the agreement do not qualify as 'composite supply' under GST law with principal supply as "Support services to agriculture, forestry, fishing, animal husbandry" as provided in serial no. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017.
2. Since the answer to the first question is negative, the question of the applicable taxable rate being NIL does not arise.