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 a 'composite supply' under GST law with the Principal Supply as "Support services to agriculture, forestry, fishing, animal husbandry" as provided in Sl. No. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017, having SAC code 9986.
2. If affirmative, whether the taxable rate applicable would be NIL in terms of Sl. No. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017.

Issue-wise Detailed Analysis:

1. Composite Supply Qualification:

The applicant, a social enterprise, entered into a Project Development Agreement with SEIPL for afforestation, reforestation, and revegetation (ARR) projects aimed at sustainable agriculture and land management. The applicant argued that their activities qualify as a 'composite supply' with the principal supply being "Support services to agriculture, forestry, fishing, animal husbandry," as per Notification 11/2017-CGST (Rate).

The applicant's activities included project design, implementation, nursery raising, sapling procurement, plantation, and maintenance, among others. They contended these activities are naturally bundled and ancillary to the principal supply of agricultural support services. The applicant relied on the definition of composite supply under Section 2(30) of the CGST Act, which requires supplies to be naturally bundled and provided in conjunction with each other in the ordinary course of business, with one being the principal supply.

However, the Authority for Advance Ruling (AAR) found that the activities undertaken by the applicant were not purely related to agriculture. The involvement in carbon credit trading indicated a commercial enterprise rather than a support service to agriculture. The AAR noted that the activities also included project design, carbon accounting, validation, monitoring, reporting, and verification, which do not align with the definition of support services under SAC code 9986.

2. Tax Rate Applicability:

Given the AAR's conclusion that the applicant's activities do not qualify as a composite supply under the specified notification, the question of a NIL tax rate does not arise. The AAR emphasized that the applicant's activities are independent and commercial, not fitting the criteria for agricultural support services, thus disqualifying them from the exemption under Notification 11/2017-CGST (Rate).

Conclusion:

The AAR ruled that the applicant's activities do not qualify as a composite supply with principal supply as "Support services to agriculture, forestry, fishing, animal husbandry" under Sl. No. 24 of Notification 11/2017-Central Tax (Rate). Consequently, the question of a NIL tax rate does not arise. The decision was based on the commercial nature of the activities and their misalignment with the definition of support services to agriculture.