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September 17, 2022

GST on the supply of services for the cultivation, planting, and nurturing of fruit trees

by CA Shivam Jaiswal in GST, Legal Court Judgement

GST on the supply of services for the cultivation, planting, and nurturing of fruit trees

Facts and Issues of the Case

The applicant is stated to be engaged in the business of cultivation, planting and nurturing of fruit trees like citrus lemon, pomegranate etc in marginalised areas and mangrove seeds and seedlings in coastal areas across different states of the country with the sole aim of environmental protection against climate change. The applicant carries out these activities pursuant to the contracts awarded by internationally acclaimed environmental organizations. The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made thereunder. The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a), (b) and (e) of sub-section (2) of section 97 of the GST Act.The applicant states that the question raised in the application has neither been decided by nor is pending before any authority under any provision of the GST Act.The officer concerned from the Revenue has raised no objection to the admission of the application.The application is, therefore, admitted.

Observation by the Court

The court had gone through the records of the issue as well as submissions made by the authorised representative of the applicant during the course of personal hearing. The court had also considered the submission made by the officer concerned from the revenue. The applicant has entered into contracts with internationally acclaimed environmental organizations for cultivation, planting and nurturing of fruit trees like citrus, lemon, pomegranate etc in marginalised areas and also for plantation of mangrove seeds and seedlings in coastal areas across different states of the country with the sole aim of environmental protection against climate change. According to the applicant, while planting and nurturing of different fruit trees aims to create sustainable livelihoods and provide nutritious food to the families and community residing in the nearby planting activities, the sole object of plantation of mangrove seeds is to enhance biodiversity and re-establish ecosystem function to protect the islands and the populace from erosion.

Agricultural produce‘, as per serial number 4(vii) of Explanation appended to the said notification means 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 usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. The applicant submits that he is engaged in supplying of services for cultivation, planting and nurturing of fruit trees that provides nutritious food to the families and community residing in the nearby planting activities. We are of the view that the applicant, by way of cultivation, planting and nurturing of fruit trees, thus provides support services to agriculture which is directly related to production of agricultural produce.

The court now come to the other activities carried out by the applicant for plantation of mangrove seeds and seedlings in coastal areas. The issue in our hand is to decide whether the aforesaid activities may be treated as support services to agriculture, forestry, fishing, animal husbandry so that such supply of services get covered under Notification as claimed by the applicant. Forestry‘ is the science and craft of creating, managing, planting, using, conserving and repairing forests, woodlands, and associated resources for human and environmental benefits. Forestry is practiced in plantations and natural stands. The science of forestry has elements that belong to the biological, physical, social, political and managerial sciences. The applicant submits that the slow degradation of the coastal ecosystem, now being hastened by global warming that is creating constant cyclones and storms, has resulted in huge losses of mangrove cover. This has in turn led to losses in productive fisheries and crustacean species which thrive in the mangroves. Mangrove loss has led to the reduction of the much needed bio-shield functions which these mangroves serve by dissipating wind and wave energy. According to the applicant, while this reforestation activity will offer an immediate economic stimulus, it will also help protecting important livelihood functions of local communities.

It is thus evident that the applicant doesn‘t provide such services for food, fibre, fuel, raw material or other similar products or agricultural produce rather the sole object of the services as it has been claimed by the applicant is to enhance biodiversity and re-establish ecosystem function to protect the islands and the populace from erosion. The court  are therefore of the opinion that such supply of services may be treated as environmental protection services‘ and shall not get covered under Support services to agriculture, forestry, fishing, animal husbandry‘. The court  agree with the view of the officer concerned from the revenue on this point.

Conclusion

Question: What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of fruit trees being cultivated and nurtured at marginalised communities?

Answer: Supply of services for cultivation, planting and nurturing of fruit trees shall be covered under serial number 24 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 having SAC 9986 and therefore shall attract Nil rate of tax.

Question: What would be the SAC Code & GST Rate for the outward supply made by the applicant, in case of mangroves being cultivated and nurtured at coastal communities?

Answer: Supply of services for plantation of mangrove seeds and seedlings in coastal areas shall be covered under serial number 32 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 having SAC 9994 and therefore shall attract tax @ 18% (CGST @ 9% + WBGST @ 9% or IGST @ 18%).

In-re-Raj-Mohan-Seshamani-GST-AAR-West-Bengal

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