2021 (8) TMI 192 - AAAR - GST

Classification of supply of service - service in relation to agricultural operations directly in connection with raising of agricultural produce - Drilling of Borewells for supply of water for agricultural operations like cultivation including seeding, planting and ploughing - Letting out compressors for pumping of water from the borewells to the agricultural fields - applicability of entry SI.No.54 of N/N. 12/2017-CT (Rate) dated 28.06.2017. HELD THAT - It is noted that the appellant while undertaking the borewell drilling activity for industries etc., (other than on agricultural lands), it is classified under SAC 995434 leviable to appropriate rate of GST. However, while undertaking the same activity on agricultural lands, the appellant seeks whether the same would fall under SAC 9986 so as to be eligible to fall within the ambit of sl.no.54 of N/N. 12/2017 and further buttresses his arguments with case laws and evidences to show that the activity is indeed done in agricultural lands and the practice in service tax era, etc. Without going into the merits of the main argument of the appellant regarding the activity undertaken is by way of agricultural operations relating to production of any agricultural produce, etc., prima facie, in the scheme of things of GST, no two classifications can be adopted for a single activity based on end use or where it is rendered, etc. The appellant himself has already classified his supply of services of borewell drilling under 9954 for the purpose of paying the tax; it defies logic as well as law that the same activity if done on agricultural land will be classifiable under a different heading 9986 - since the same equipment is used for the drilling activities, whether on agricultural lands or for industries, etc., it would not be possible for the tax administration to identify whether the driller is exclusively undertaking agricultural drilling only thereby leading to evasion of tax only. There are no reason to interfere with the order of the Advance Ruling Authority in this matter - appeal disposed off.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Eligibility for exemption under Sl.No.54 of Notification 12/2017 CT (Rate) dated 28.06.2017.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant, engaged in drilling borewells and letting out compressors for agricultural purposes, sought advance ruling on whether these services are classified under 'Support Service for agriculture' (SAC 9986). The Advance Ruling Authority (AAR) ruled that both activities are not classifiable under SAC 9986, thus not eligible for the exemption under Sl.No.54 of Notification 12/2017-C.T. (Rate). The appellant contested this, arguing that the services should fall under SAC 9986, emphasizing the inclusive nature of the definition and the direct relation to agricultural production.

2. Eligibility for Exemption under Sl.No.54 of Notification 12/2017 CT (Rate):
The appellant argued that their activities should be exempt under Sl.No.54, which covers services directly related to agricultural operations. They referenced the inclusive nature of the notification and past interpretations, including a clarification letter from the Finance Minister under the previous tax regime, which exempted similar services. The appellant also cited legal precedents supporting a broad interpretation of exemptions and the right to choose the most beneficial classification.

Discussion:
The appellate authority examined the appellant's arguments and statutory provisions, noting that the same borewell drilling activity is classified under SAC 995434 for non-agricultural purposes. It was emphasized that a single activity cannot have dual classifications based on end-use or location. The authority also highlighted practical challenges in tax administration and potential evasion if different classifications were allowed for the same equipment used for both agricultural and non-agricultural purposes.

The authority referred to the GST Council's deliberations, which did not grant an exemption for borewell drilling for agriculture, maintaining the status quo from the service tax regime. The Fitment Committee's reasoning, which was not to exempt such services from GST, was also considered.

Ruling:
The appellate authority upheld the AAR's decision, finding no reason to interfere. The appeal was disposed of, confirming that the services provided by the appellant do not qualify for the exemption under Sl.No.54 of Notification 12/2017-C.T. (Rate).