The Telangana State Authority for Advance Ruling (AAR) has ruled that seed is not an agricultural produce, GST is applicable on its storage and packaging services.
The applicant, M/S M. Narasimha Reddy & Sons is engaged in production and processing 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 applicant is desirous for ascertaining whether the services obtained by them in production of the seeds from other agencies including GTA are taxable or exempt.
The applicant is sought the advance ruling on the issue whether the seeds dealt by the company comes under the purview of ‘agricultural produce’ and also whether the storage of the seeds in the storage facility/godowns, loading, unloading and packing of the seeds, the processes, namely, cleaning, drying, grading and treatment with chemicals by the applicant – job worker on job work basis are exempt from payment of GST.
The coram of S.V.Kasi Vishveswara Rao and B.Ragu Kiran has ruled that the applicant is supplying goods which are produce of cultivation of plants. However they are of seed quality and not grain, therefore further they are not meant for food, fibre, fuel or raw material for further processing. In the definition of agricultural produce, the word raw material is used which is a general word and is in the company of specific words i.e., food, fibre and fuel. These specific words indicate direct consumption by human or in industry but not in cultivation. Further even if processing is done it should be such processing as done by a cultivator for primary market. Therefore the seeds produced by them do not qualify as agricultural produce and hence no exemption for Storage of seeds in the storage facility/godown, loading/unloading, packaging, cleaning, drying, grading and treatment with chemicals carried out by a job worker or on job work basis.
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