2021 (1) TMI 335 - AAR - GST

Exemption from GST or not - Fumigation service provided in a warehouse of agriculture produce - applicability of Entry No. 54 of Not. No. 12/2017-CT (Rate) dated 28.06.2017 - Classification of Fumigation of such services - classified under Service Accounting code 998531 or not - liability of tax. HELD THAT - The applicant is providing service of pest control that completely fills an area with gaseous pesticides of fumigants to suffocate or poison the pests within the area of fumigation. The fumigation is utilized for control of pests in Grain and produce and it is also used during the processing of goods to be imported or exported to prevent transfer of exotic organism. The applicant provides fumigation service to their clients as per their requirements in factory premises, in warehouse premises may be stored Agri and non agri products. The applicant further submitted that they have order from their client to Fumigation Services in a bonded/ customs warehouse of Food Grain, Pulses and similar to the agri products and such Agri produce stored in a warehouse may be imported or Exported produced - As per the Entry No. 54 (h) of Notification No. 12/2017-CT (Rate) dated 28.06.2017 as amended Services by way of fumigation in a warehouse of agriculture produce are not liable to Goods and Service Tax. It means that service of fumigation provided to agriculture produces stored in a warehouse are exempted from payment of GST. The term primary market is not defined in the GST Act. It is understood in common parlance as a platform or a place, like a mandi, where the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters, etc. It appears that services relating to the cultivation of plants include support services as may be required till the farmer disposes the agricultural produce in the primary market. All services and processes beyond the realm of the primary market are excluded. In the custom bonded warehouse agri produce stored for export do not cover under the definition given under explanation 2(d) of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Further, in absence of any facts on the records it cannot be concluded that the custom bonded warehouse are used exclusively only for storage of agriculture produce and are not used for storage of non agriculture produce. Further it is observed that applicant in his application has submitted that in the custom bonded warehouse imported agri produce are also stored. The imported produce has been procured from the farmers in the foreign and exported to India. Clearly, it is, whether processed in a mill, no longer in the domain of the primary market or at the farmer s hand - the fumigation service provided by the applicant in custom bonded warehouse where in exported and imported agriculture produce are stored is not covered under Sl. No. 54(h) of the Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, therefore, applicant service is liable to GST. The service of fumigation/pest control in warehouse provided by the applicant is merit classification under Service Accounting Code (SAC) 99853. In view of the entry No 23(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 the rate of GST for the service of fumigation/pest control provided in a warehouse of agriculture produce would be 18%.

Summary

Issues Involved:
1. Taxability of fumigation services provided in a warehouse of agricultural produce.
2. Classification of fumigation services under Service Accounting Code 998531.
3. Determination of tax liability on such services.

Issue-wise Detailed Analysis:

1. Taxability of Fumigation Services in a Warehouse of Agricultural Produce:
The applicant, M/s. Shri Sai Pest Control, sought clarification on whether fumigation services provided in a warehouse of agricultural produce are exempt under Entry No. 54 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. The applicant argued that such services should be exempt, as they are related to agricultural produce stored for import or export purposes.

The Authority for Advance Ruling examined the nature of the fumigation services provided, which involves using gaseous pesticides to control pests in grain and produce, including during the processing of goods for import or export. The key consideration was whether these services fall under the exemption provided for "fumigation in a warehouse of agricultural produce."

The relevant entry (54) of Notification No. 12/2017-CT (Rate) exempts services related to the cultivation of plants and rearing of animals for food, fiber, fuel, raw material, or other similar products, specifically mentioning fumigation in a warehouse of agricultural produce. However, the definition of "agricultural produce" under Explanation 2(d) of the Notification specifies that it must be produce from cultivation or rearing that has not undergone significant processing beyond what is usually done by a cultivator to make it marketable in the primary market.

The Authority concluded that fumigation services provided in a bonded/customs warehouse for exported or imported agricultural produce do not fall under the exemption. This is because such produce has typically undergone further processing to make it suitable for export, thus moving beyond the primary market and not fitting the definition of "agricultural produce" as per the Notification.

2. Classification of Fumigation Services under Service Accounting Code 998531:
The applicant sought confirmation on the correct classification of fumigation services under Service Accounting Code (SAC) 998531. The Authority referred to the explanatory notes of SAC, which include "disinfecting and exterminating services," covering fumigation services and pest control services.

The relevant entry in the explanatory notes for SAC 99853 includes:
- Disinfecting dwellings and other buildings.
- Disinfecting vehicles (buses, trains, boats, planes).
- Exterminating insects, rodents, and other pests.
- Fumigation services and pest control services.

Based on this, the Authority confirmed that the classification of fumigation services under SAC 99853 is correct.

3. Determination of Tax Liability on Fumigation Services:
To determine the GST rate applicable to fumigation services, the Authority referred to Notification No. 11/2017-CT (Rate) dated 28.06.2017. The relevant entry (23) under Heading 9985 specifies the GST rate for support services, including cleaning services.

The applicable GST rate for fumigation/pest control services under SAC 99853 is 18% (comprising 9% CGST and 9% SGST).

Ruling:
1. Taxability: Fumigation services provided in a warehouse of agricultural produce are taxable and not exempt under Entry No. 54 of Notification No. 12/2017-CT (Rate) dated 28.06.2017.
2. Classification: The classification of fumigation services under Service Accounting Code 99853 is correct.
3. Tax Liability: The GST rate for fumigation/pest control services in a warehouse of agricultural produce is 18% (CGST 9% + SGST 9%).