Dried and polished turmeric supplied by a farmer is an agricultural produce and will not attract GST, Maharashtra’s Appellate Authority for Advance Ruling (MAAAR) has said.
This ruling is significant as turmeric attracts GST at the rate of 5 per cent. Also, Maharashtra’s Authority for Advance Ruling (MAAR) earlier ruled that dried and polished turmeric was not covered under the definition of agricultural produce and would attract 5 per cent GST. Aggrieved by this ruling, the appellant, a commission agent in the APMC Mandi, moved the MAAAR, which set aside the ruling by MAAR.
The appellate authority observed that fresh turmeric contains moisture, and is blackish in colour, which renders the fresh produce perishable and unsustainable. To make it more marketable, the raw turmeric is subjected to post-harvesting operations including boiling, drying and polishing, which are carried out by the farmers on their farms, Thus, it is clear that the impugned product i.e., dried turmeric (whole) is a produce of the cultivation of a plant, which is subjected to post-harvesting processes.
The bench relied on laboratory test reports which certified that there is no difference between the essential characteristics of raw turmeric and dried turmeric and both samples had oil and curcuminoid content, though in different concentrations. It also agreed with the arguments presented by the appellant that turmeric in the raw/ fresh form is not sold n the market and, farmers conduct post-harvesting processes on them.
Based on these arguments, MAAAR declared that the said product satisfied all the conditions required to qualify as ‘agriculture produce.’ Accordingly, though the applicable rate for turmeric (in whole form and not in powder form) is 5 per cent, “the first supply (in whole form-not in powder form) by farmers, being supply by non-taxable persons on the Agriculture Produce and Marketing Committee (APMC), is not liable to GST.”
There were two more questions – whether services rendered by the appellant as a commission agent in APMC are liable to GST, and whether the appellant is required to be registered under GST - which were answered in the affirmative by MAAR. However, MAAAR said services provided by the appellant in the capacity of a commission agent for sale or purchase of dried turmeric, will not be subject to levy of GST.
On the third question, the appellate authority took note of a circular by the Central Board of Indirect Taxes and Customs (CBIC). It was said that, generally, a commission agent under the APCM Act makes supplies on behalf of the agriculturist. Further, an agriculturist who supplies produce out of cultivation of land is not liable for registration and, therefore, does not fall within the ambit of the term ‘taxable person’. Thus, a commission agent making supplies on behalf of such an agriculturist, who is not a a taxable person, is not liable for compulsory registration. However, in cases where he is liable to pay tax under reverse charge, compulsory registration is required.
“The appellant is required to be registered,” MAAAR ruled.