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TMI Blog2023 (3) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... ket. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceiving the agrochemicals, the dealers/distributors may sell the same in retail packages of 100 ml to their customers/farmers. Besides the Applicant supply the services of spraying agrochemicals to the farmers. The spraying of the agrochemicals is undertaken on the crops at the agricultural farm for the protection of the crop produce and such service is provided to the farmers directly. The applicant has elaborated the matter as following:- (i) Agrochemicals The agrochemicals play a vital role in reducing crop loss from a range of insects, herbs, fungus, nematodes, rodents, pests etc. It helps in improving the yield and farm income of the farmers. The agrochemicals are used for controlling disease, insects and weeds in the crop produce. They need to be applied to plants and soil in the form of a spray. The main function of a sprayer is to break the chemicals into droplets of effective size and distribute them uniformly over the agricultural land which needs to be protected. The agrochemicals include herbicides, fungicides and insecticides which help to (a) reduce competition from weeds to the crop (b) minimize the effects of fungal diseases, (c) control the infection spread fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or consideration is provided to the dealers/distributors. (g) For undertaking the spraying service, the Applicant imports the spraying machines from Japan and pays the applicable IGST under Integrated Goods and Services Tax Act (hereinafter referred to as "IGST Act"). The ownership of the machines belongs to the Applicant and the operating cost of the spraying machine i.e. driver's salary, fuel, repair and maintenance, depreciation is also borne by the Applicant. The farmer pays a consideration for the spraying services procured by it from the Applicant. Submissions made by the applicant on the legality of the issue at hand; The Applicant states that the activity related to spraying of agrochemicals provided by him to the farmers is covered under Sr. No. 54 of the Notification No. 12/2017- CT and under Serial No. 57 of the Notification 9/2017- Integrated Tax (Rate) dated 28.06.2017, as amended (hereinafter referred to as "Notification No. 9/2017-IT"). The relevant provisions are as under:- (a) Determination of Supply of goods and services As per Section 9 of CGST Act, tax is levied on all intra-state supply of goods or services or both, except on the supply of alcoholic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istributors/dealers is to supply the agrochemicals to the farmers, thus, it is clear that the supply of agrochemicals by the Applicant to the distributors/dealers is independent of any spraying service that may/may not be provided by the Applicant to the farmer directly for consideration. Separate invoices are issued by the Applicant for the supply of goods (to dealers/distributors) and the supply of services (to farmers). The farmer has to approach the Applicant separately to avail the spraying services from it and the same is under a separate and independent arrangement between the Applicant and the farmer. It is pertinent to mention here that the recipients in both the supply i.e. the supply of agrochemicals and supply of spraying services are different. Both the supplies are independent of each other and have no correlation with each other. (b) Levy of GST of the supply From above, it can be said that the service of spraying agrochemical as provided by the Applicant to the farmers is an independent supply of services under the CGST, HGST as well as IGST Act, 2017. The spraying services is provided to farmers against consideration, thus, the taxability of the same shall arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. Support services to crop production. This service code includes: i. services to improve the propagation quality of the seed, including treatment of genetically modified seeds; removal of non-seed materials, undersized, mechanically or insect-damaged and immature seeds; removal of seed moisture to a safe level lor seed storage; drying, cleaning, grading and treating of seeds to be marketed; ii. Post-harvest crop services such as preparation of crops for primary markets, cotton ginning services: iii. Other support services to crop production like tilling of fields preparatory to planting: planting, cultivation and fertilization of crops; spraying, including from the air; iv. pest control for agriculture; trimming of fruit trees and vines; transplanting and thinning of crops; harvesting; v. provision of agricultural machinery with crew and operators; operation of irrigation systems for agricultural purposes; vi. other services necessary for agricultural production; Crop production services on inputs owned by others like operation of a crop production unit on a fee or contract basis. In the present case, the services undertaken by the Applicant is that of spraying of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cultivator or producer or farmer. At this stage it is pertinent to mention that the farmers can also undertake spraying on their own. However, in order to ensure efficient spraying with minimal wastage and optimum results, such services are provided by the Applicant to the farmers. The Applicant is merely an agent in present case. So, it can be said that the spraying of agrochemicals is done on behalf of the cultivator or producer at the agricultural farm. c) The third condition is that the process undertaken does not alter its essential characteristics but makes it marketable for primary market. The spraying services are usually carried out to protect the crop from being infected by insects, weeds, herbs etc. The spraying services are directly related to the agricultural production and cultivation process. It helps the crop produce to attain the desired quality for the primary market. The said activity does not alter the essential characteristics i.e. the shape, size, texture, colour, odour and cooking qualities of the agricultural produce. It only protects the crop and makes it suitable for consumption and marketable for the primary market. It is to be noted here spraying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are carried out for growth and preservation of the produce like weeding, digging soil around the crops grown etc. and those operations which would make the product fit for use in the market like tending, pruning, cutting, harvesting, etc. Further, the Hon'ble Supreme Court also held that agricultural operations in the wider sense comprise within its scope the basic as well as the subsequent operations, regardless of the nature of the products raised on the land. The principles which emerge from the case of C.I.T. v. Benoy Kumar (supra), has been laid down by the Hon'ble Supreme Court in the case of Maheshwari Fish Seed Farm v. T. Nadu Electricity Board and Ors. (2004 (4) TMI 632-SC) On the basis of the above judicial pronouncements of the Apex Court, it can be said that "agricultural operations" as a whole, consist of basic operations as well as subsequent operations performed in conjunction with each other on the agricultural produce. Whereas basic operation is the activity of cultivation and subsequent operations are activities of harvesting, threshing, plant protection or testing, etc., which essentially enhances the produce and makes it fit for market. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural produce but make it only marketable for the primary market. In order to fall under said sub-clause, following conditions are requisite: (a) Service should be directly related to cultivation of the agricultural produce; (b) The processes should be carried out at an agricultural farm; (c) The operations should be in the nature of tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations. (d) The essential characteristics of agricultural produce should not be altered. (e) The service should make the agricultural produce marketable for the primary market. The first condition is that the service should be directly related to cultivation of agricultural produce and since it has already been discussed above. It is reiterated that this condition stands fulfilled. The second condition is that the process should be carried out at an agricultural farm. The word "process" and "farm" are essential in the said condition, therefore, it is necessary to understand the meaning of the said words. The word "process" has been defined by the Oxford Learner's Diction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided by the Applicant to the farmers are for plant protection and undertaken at the agricultural farm while the crop is standing. The agrochemicals are essential to protect the crop from being infected by insects, weeds, rodents, fungus etc. The spraying services are directly related to the agricultural production and cultivation process and help the crop produce to attain the desired quality for the primary market. The said activity does not alter the essential characteristics of the agricultural produce. It only protects the crop and makes it suitable for consumption and marketable for the primary market. It is abundantly clear that the service of spraying agrochemicals is a support service to crop production which is provided by the Applicant to the farmers to protect their crop produce and to make the crop produce suitable for consumption, and marketable for the primary market. Hence, all the requirements of Sr. No. 54, clause (c) of Notification No. 12/2017-CT and Sr. No. 57 of the Notification No. 9/2017 IT are fulfilled by the Applicant. Therefore, the spraying services as provided by the Applicant to the farmers are exempted supply of service as per Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sprayed: • Wheat, • Sugarcane, • Corn (Rabi), • Cotton (Kharif) Besides the applicant has submitted a list of agro chemicals manufactured by him and the images of the spraying machines along with the sample invoices raised by him to the farmers for providing the services of spraying of the manufactured agrochemicals. And the Jurisdictional Officer of the Applicant has not submitted any comments on the matter. DISCUSSION AND FINDINGS: The matter has been perused by the Authority in extenso. All the factual and legal provisions with reference to the services provided by the applicant to the farmers has been examined by the Authority. We have considered the submissions made by the applicant in the application as well as the arguments made by his representative. The main issue in this case is to decide whether the services of spraying agrochemicals manufactured by the applicant is a taxable or an exempted supply vide entry no. 54 of notification no. 12/2017-CT(R) dated 28.06.2017? To decide whether the services supplied by the applicant is exempted or not, we have to look into the nature of activity carried by him. The applicant himself has quite elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the farmers are directly selling to the buyers, including the wholesalers, mills, food processing units, exporters, etc. It means that the services related to the cultivation of plants including support services as may be required till the farmer disposes the agricultural produce in the primary market. All the services and processes beyond the realm of the primary market are excluded from the exemption. In brief, it can be said that Agriculture Produce as per the definition needs to have three essential necessary elements i.e. a) The Produce must emerge from cultivation of plants or rearing of all life forms of animals. b) Either' no further processing is done or such processing is done as is usually done by a cultivator or producer on the said produced, i.e. meaning thereby the Produce must broadly retains its physical and chemical constitution/form. c) The process undertaken should not alter its essential characteristics but makes it marketable for primary market i.e. the definition limits the scope of processing and allows only those activities which help the produce to attain the condition of its first marketability in primary market. c. Agriculture Operations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices, but shall not include the provision of training services. These services are processes that professionals use to execute a core program and functions that generate revenue. Further, Agricultural support services means the aerial or surface application of seed, fertilizer, pesticides or soil amendments and custom harvesting. The relevant entry with reference to the Support services to crop production is SAC 998611 which states that this service code includes (iii) Other support services to crop production like tilling of fields preparatory to planting; planting, cultivation and fertilization of crops; spraying, including from the air; Conclusion:- From the above discussion on the matter, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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