Order date – 19 October 2022

Key Pointers –

• The Applicant, M/s. Ganga Kaveri Seeds P Ltd, are primarily engaged in production and sale of agricultural seeds viz maize, paddy, sunflower, bajra, wheat, cotton, jute, sorghum, mustard etc.
• In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seed in various facilities after processing them. In the process they also transport the seeds by engaging a GTA.
• The issue is whether activities carried by the applicant are eligible for exemption/taxable under Notifications No. 11/2017-Central Tax (Rate), dated. 28.6.2017 and No. 12/2017-Central Tax (Rate), dated. 28.6.2017?
• The AAAR observed that the applicants are in the business of production and sale of agricultural seeds. In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seeds in various facilities after processing them. In the process they also transport the seeds by engaging a GTA.
• The AAAR finds that as per Notifications No. 11/2017-CT(R), dt. 28.6.2017 and No. 12/2017-CT(R), dt. 28.6.2017 defines “agriculture produce” as any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.
• It was also observed that if the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications.
• Therefore, the seed quality goods produced by them cannot be treated as agricultural produce. Notifications No. 11/2017-Central Tax (Rate), dated. 28.6.2017 pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. As per Notification No. 12/2017-Central Tax (Rate), dated. 28.6.2017 exemption of services engaged by a cultivator or an agriculturist and not to services engaged by a seed company.
• Transportation of seeds from farm to storage facility and then transportation of packed seed from storage facility to distributors is not exempt under sl.no. 21(a) of Notification No. 12/2017 as this entry provides exemption on transportation services to agricultural produce. 
• If processing is undertaken by an applicant himself for in house seed production, there is no supply and hence exempt.