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TMI Blog2023 (12) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... ning whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal would be whether invoice for further supply or goods on behalf of the principal is being issued by the agent or not. Since the scope of supply under the GST Act also covers the activities specified in schedule-I by or undertaken through an agent, the key ingredient for determining relationship would be whether the invoice for the further supply of goods on behalf of the principal is being issued by agent or not. In other words, the crucial point is whether or not the agent has the authority to pass on the title of the goods on behalf of the principal. As soon as the auction for a lot is over, the auctioneer (Market officer) shall fill in the particulars in a book to be maintained in Form-H and shall secure the signatures of both the buyer and the seller or their respective representatives, whoever may be present at the spot. H register will have all details of date, Kacha Arhtia, name and address of seller, description of produce, quantity, rate, name of buyer. The responsibility of paying the market fee as prescribed under APMC Act and Rules shall be of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MEMBER Present for applicant : Advocate Rishab Singla, Advocate Rishab Singla, Advocate Rishab Singla and Advocate Chinansha (An Appeal against this order lies with the Appellate Authority in terms of Section 99 and Section 100 of the CGST Act, 2017 and Section 99 and Section 100 of the PGST Act, 2017 within a period of thirty days from the date of communication of this order.) 1. M/s. Bansal Industries, as detailed in the table above and hereinafter referred to as 'applicant', had submitted an application for advance ruling in form GST ARA-01 dated 22.02.2019 seeking to know whether Purchase of raw cotton from Kacha Arhtia who is a registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of section 9(3) of CGST/PGST Act, 2017? 2. Proceedings Under Section 98 of CGST/PGST Act:- In this regard personal hearings were held on 18.02.2022, 05.08.2022 and 16.08.2022 before the Advance Ruling Authority, Punjab. During proceedings on 18.02.2022,05.08.2022, Sh. Rishab Singla, Advocate appeared on behalf of the applicant and submitted his oral and written submission on the matter which are pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been issued by the CIBC, wherein scope of Principal-Agent relationship in context of Schedule-I of GGST Act has been explained. In the said circular, it has been clarified that the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of Principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name, then any provision of goods from the Principal to the Agent would fall within the fold of said entry, i.e. Supply of Goods. In the said circular, CBIC has mentioned certain scenarios and according to facts of the present case, the case of the petitioner falls within Scenario 4. It has been further clarified that in cases where the supply of agricultural produce is not exempted and liable to tax, such Commission Agent shall, be liable for compulsory registration under subsection (vii) of Section 24 of the Central GST Act. 3. Further, a Corrigendum dated 05.11.2018 has been issued to the said circular wherein para 9 has been amended and it has been clarified that where a Commission Agent is liable to pay tax under Reverse Charge, such an agent will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration as per provision of Section 24(l)(vii) of the Acts ibid and they shall be liable to charge tax or RCM on supply of Raw Cotton'. 6. SUBMISSIONS BY THE JURISDICTIONAL AUTHORITY:- ACST, Fazilka has submitted written reply on behalf of the department. ACST Fazilka as per his reply has stated that, In order to reach at some conclusion in respect of above said question first of all we will have to analyse the provision and notification regarding levy of Tax on reverse charge basis which have been reproduced below: Section 9(3) of the CGST/SGST (UTGST) Act, 2017 reads The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. Notification No. 4/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 G.S.R. 676 (E). - In exercise of the powers conferred by sub-section (3) of section 9 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No. 43/2017-Central Tax (Rate) New Delhi, the 14th November, 2017 G.S.R. 1389(E). - In exercise of the powers conferred by sub-section (3) of section 9 of the Central and Services Tax Act, 2017, (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 4/2017- Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 676 (E), dated the 28th June, 2017, namely:- In the said notification, in the TABLE, - (i) after SI. No. 4 and the entries relating thereto, the following serial number and the entries shall be inserted, namely: 4A 5201 Raw Cotton Agriculturist Any registered person [F. No. 354/320/2017- TRU] (Ruchi Bisht) Under Secretary to Government of India Thus from the above notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on delivery of Form I. So as per above said provisions the Kacha Arhtiya is liable to pay the consideration thus may be called a registered recipient if registered and thus the liability to pay the Tax on reverse charge basis will lie upon him. 7. DISCUSSIONS AND FINDINGS: - 7.1 We have carefully examined all the relevant records on file alongwith the documents submitted by the Applicant on 24.09.2022. 7.2 The nub of the matter lies in whether the applicant is the person liable to pay GST under RCM in respect of raw cotton purchased by them from grain markets in terms of Notification No. 04/2017-CT(Rate) dated 28.06.2017 as amended w.e.f. 15.11.2017 vide Notification No. 43/2017-CT(Rate) dated 14.11.2017 or the Kacha Arhitya. The Applicant in the course of business activities is procuring raw cotton from multiple agriculturists through Kacha Arhtia as per provisions of The Punjab Agricultural Produce Markets Act, 1961 ( The APMC Act ). 7.3 Before proceeding further, it would be apposite here to have a closer look at the issue in conjunction with the relevant statutory provisions of the CGST Act, 2017. 7.4 The Notification No. 04/2017-CT(Rate) dated 28.06.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are held to be recipients of supply from the agriculturalists. 7.7 Further, the term supplier as defined under clause (105) of Section 2 of the CGST Act, 2017 (reproduced below) means the person supplying the said goods or services or both and includes an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied. (105) supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied; The term agent is defined under clause (5) of Section2 of the CGST Act, 2017 (reproduced below) and means a person, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another and the term 'agent' inter alia includes an 'arhatia'. (5) agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST Act and PGST Act, 2017. As per the provisions of section 9(3) of CGST Act, 2017 and PGST Act, 2017, the Government may, on the recommendations of the Council, by Notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. The Notification No. 04/2017-CT(Rate) dated 28.06.2017 as amended covers this scenario. Second scenario is covered by section 9 (4) of the CGST Act and PGST Act, 2017 where taxable supplies by any unregistered person to a registered person is covered. Section 9(4) of CGST Act, 2017 and PGST Act, 2017 provides that the tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schedule I, is in relation to the activities between the principal and his agent. Sr. No. (3) under Schedule-I (Activities to be treated as Supply even if made without consideration) of the Central GST Act, 2017 and PGST Act, 2017 has the following entry: 3) Supply of goods,- (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal. 7.15 The applicant has sought a ruling on whether purchase of raw cotton from Kacha Arhtia who is a registered dealer constitutes a purchase from agriculturist so as to attract liability under Reverse Charge Mechanism in view of Section 9(3) of Central GST Act, 2017. 7.16 To understand whether the Kacha Arhtia is liable to pay GST under reverse charge basis, it is pertinent to go through the Circular No. 57/31/2018-GST issued vide CBEC-20/16/4/2018-GST dated 4th September, 2018(to be read with the corrigendum dated 05th November, 2018) which has explained the Scope of Principal-Agent relationship in the context of Schedule-I of the CGST Act. For reference, Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Contract Act, 1872. 5. Further, the two limbs of any supply under GST are consideration and in the course or furtherance of business . Where the consideration is not extant in a transaction, such a transaction does not fall within the ambit of supply. But, in certain scenarios, as elucidated in Schedule-I of the CGST Act, the key element of consideration is not required to be present for treating certain activities as supply. One such activity which has been detailed in para 3 of Schedule-I (hereinafter referred to as the said entry ) is reproduced hereunder: 3. Supply of goods,- (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal. 6. Here also, it is worth noticing that all the activities between the principal and the agent and vice versa do not fall within the scope of the said entry. Firstly, the supply of services between the principal and the agent and vice versa is outside the ambit of the said entry, and would therefore require consideration to consider it as supply and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctioneer arranges for the auction and identifies the potential bidders. The highest bid is accepted and the goods are sold to the highest bidder by M/s. XYZ. The invoice for the supply of the goods is issued by M/s. XYZ to the successful bidder. In this scenario, the auctioneer is merely providing the auctioneering services with no role played in the supply of the goods. Even in this scenario, Mr.B is not an agent of M/s. XYZ for the supply of goods in terms of Schedule I. Scenario 3 Mr. A, an artist, appoints M/s. B (auctioneer) to auction his painting. M/s. B arranges for the auction and identifies the potential bidders. The highest bid is accepted and the painting is sold to the highest bidder. The invoice for the supply of the painting is issued by M/s. B on the behalf of Mr. A but in his own name and the painting is delivered to the successful bidder. In this scenario, M/s. B is not merely providing auctioneering services, but is also supplying the painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. A. This scenario is covered under Schedule I. A similar situation can exist in case of supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax or wholly exempt under GST. However, in cases where the supply of agricultural produce is not exempted and liable to tax, such commission agent shall be liable for compulsory registration under sub-section (vii) of section 24 of the CGST Act. 7.17 As clarified vide above circular, the crucial component for covering a person within the ambit of the term 'agent', as contained in sub-Section (5) of Section 2 of the CGST Act and PGST Act, 2017, is corresponding to the representative character identified in the definition of agent under the Indian Contract Act, 1872. The said circular further clarifies that a key ingredient for determining whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal would be whether invoice for further supply or goods on behalf of the principal is being issued by the agent or not. 7. 18 Since the scope of supply under the GST Act also covers the activities specified in schedule-I by or undertaken through an agent, the key ingredient for determining relationship would be whether the invoice for the further supply of goods on behalf of the principal is being issued by agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s his consent to sell his produce, shall be sale price of the produce. (7) The buyer shall be considered to have thoroughly inspected the produce for which he has made a bid and he shall have no right to retract it. (8) As soon as the auction for a lot is over the auctioneer shall fill in the particulars in a book to be maintained in Form-H and shall secure the signatures of both the buyer and the seller or their respective representatives, whoever may be present at the spot. (8-A) A register in Form-H shall be maintained by the committee wherein the agricultural produce which remained unsold during the course of auction shall be entered and it shall be obligatory for every dealer or Kacha Arhtia, or commission agent, as the case may be, to report about the unsold produce to the committee as soon as his agricultural produce is sold. (9) The buyer shall be responsible to get the agricultural produce weighed immediately after the auction or on the same day the produce is purchased by him and the seller or the buyer shall be liable for any damage to, or loss of or deterioration in, the produce after the auction according to the local usage or custom or as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riculturist, gives his consent to sell his produce, shall be sale price of the produce. As soon as the auction for a lot is over, the auctioneer (Market officer) shall fill in the particulars in a book to be maintained in Form-H and shall secure the signatures of both the buyer and the seller or their respective representatives, whoever may be present at the spot. H register will have all details of date, Kacha Arhtia, name and address of seller, description of produce, quantity, rate, name of buyer. The responsibility of paying the market fee as prescribed under APMC Act and Rules shall be of the buyer in terms of provision of APMC Act and Rules and M/s Bansal Industries being a buyer in instant case, is liable to pay such fee and not the Kacha Arhtia or Agriculturist. Delivery of agricultural produce is made only after the Kacha Arhtia or the buyer gives to the seller a sale voucher in Form J clearly mentioning the details of the buyer and other details of the produce. On delivery of agricultural produce to a buyer, the Kacha Arhtia executes a memorandum in Form-I and delivers the same to the buyer on the same day or the following day clearly mentioning the name of the buyer co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account numb er IFSC code Total amount to be paid Labour charges to be deducted and paid to Kach arhtia, if any Net amount to be paid 1 2 3 4 5 6 7 8 9 10 11 12 13 14 RS. RS. RS. Commission Brokerage Palledari Filling Sewing Charges Other Charges Total RS. Rs. Rs. Rs. Signature of Kacha Arhtia Acknowledgement by the buyer. 7.18.4 The issuance of different Forms for different modes of payment to the seller and the relevant provisions of law clearly shows that the Form-I and Form-Ill are not Bill of supply or an invoice issued by the Kacha Arhtia rather th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of goods is to be made to the successful bidder, i.e. buyer, at that point also the consent of the agriculturist is required before the goods can be transported to the buyer's premises. For this, the Form-J and Form-I have been prescribed by APMC Rules. These forms are statutory records and not invoices as claimed by the Noticee. Further, We observe that the provisions of APMC Rules also provide an opportunity to the buyer to remit money to the seller either directly or via the Kacha Arhtia. It is in fact only as an option of convenience wherein the money is transmitted via Kacha Arhtia after deduction of their commission etc which is the regular market practice. 7.19 From the foregoing, We find that M/s Bansal Industries i.e. the applicant is the recipient of supply of goods (raw cotton) by an agriculturist and not the Kacha Arhtia. As such, the applicant is liable to pay GST under reverse charge basis being a registered person in terms of Notification No. 13/2017- Central Tax (Rate) dated 28th June 2017 as amended vide Notification No. 43/2017-Central Tax (Rate) dated 14th November 2017 read with corresponding Notifications issued under Punjab State GST Act 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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