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November 25, 2022

Seeds are liable to GST as they are not consumables

by CA Shivam Jaiswal in GST, Legal Court Judgement

Seeds are liable to GST as they are not consumables

Facts and Issue the case

The appellant has a GSTIN of 36 AAACG3220D1ZB and is registered for GST. The main business of M/s Narsimha Reddy & Sons is the production and processing of agricultural seeds. The applicant outsources certain production-related tasks to job worker, such as cleaning, drying, grading, and packing, and after processing the seeds, stores them in various facilities.  In the process they also transport the seeds by engaging a GTAThe applicant submitted a request to the lower authority asking for a decision on their operations in relation to exemption from/taxability under the Goods and Services Tax Act. The applicant filed the current appeal with this authority because the lower authority’s decision was clearly against their interests.

Observation of the case

This authority observes that the entire scope of the disagreement centres on the exemption mentioned in Notification No. 12/2017-CT(R), dated June 28, 2017, and Notification No. 11/2017-Central Tax (Rate), dated June 28, 2017. The term “agricultural produce” has been specified in both notices.

Seeds are not considered agricultural produce by the Telangana Authority of Advance Ruling (AAR), and are therefore subject to the Goods and Services Tax (GST). The agriculture industry may experience difficulties as a result of this development in the future.

The AAR decided that in the judgements of Ganga Kaveri Seeds and Narasimha Reddy & Sons, seed is regarded differently from grain. The AAR decided that distinct laws would apply to grain and seed. Therefore, the concessions that apply to the grain that a cultivator produces will not apply to the seed.

As a result, it is crucial to examine the concept of “agricultural production.” It is important to understand that the main requirement for qualifying as agricultural produce for exemption is that either no processing is done on the produce or that processing is done in a manner typical of a cultivator’s or producer’s practise and does not change the produce’s essential characteristics but makes it marketable for primary market.

The AAR emphasised that both businesses are supplying commodities made from plant farming. It claimed that the businesses produced and sold agricultural seeds. They hired people about the manufacturing of seeds to perform certain tasks such as cleaning, drying, grading, and packing during the production process.

The ejusdem generis concept, which states that general terms should take the colour of specialised words accordingly, has been applied by AAR. The AAR ruled that the only kind of raw materials that can be consumed as food, fibre, etc. are those used in the definition of agricultural produce. Because the seeds are not consumables, they are subject to GST.

When referring to agricultural products, which often refer to food, fibre, and fuel, the term “raw material” is used. The AAR determined that certain words in the instance of Ganga Kaveri suggest human consumption directly or in the industry but not in cultivation.

Although the definition of agricultural produce excludes the cultivation or supply of seeds, these phrases indicate direct consumption by humans or in the industry.


In the Narasimha Reddy case, the AAR determined that the applicant’s seed storage, godowns,, loading, unloading, and packing are not exempt from GST payment. The AAR held that raw material used in the definition of agricultural produce is confined to food, fibre, etc., which can be consumed. Hence, the seeds are liable to GST as the seeds are not consumables.


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