Turmeric in Whole Form Is 'Agricultural Produce', Attracts 5% GST: AAAR

The two-member bench of Rajeev Kumar Mital and Ashok Kumar Mehta has observed that the first supply of turmeric in whole form by farmers, being supplied by a non-taxable person in the Agricultural Produce and Marketing Committee, is not liable to GST by virtue of the provisions of section 23 (1) (b) and 2 (107) of the CGST Act, 2017.

The appellant, as a "commission agent", renders his services to farmers in relation to the supply of turmeric (whole turmeric, not in powder form) to traders in APMC, Sangli. The Appellant is in the business of selling the turmeric on his own as a "trader".

The appellant is registered as a "commission agent" and also as a "trader." The services of the appellant as a "commission agent" are regulated by the Maharashtra Agricultural Produce and Marketing (Regulation) Rules, 1967 (APMC Rules) and byelaws of the APMC Sangli.

Based on the tender/auction, if a farmer and a buyer mutually agree to a sale and purchase, the Appellant, being a commission agent, facilitates activities ancillary to the supply of turmeric in APMC Sangli. The Appellant gets a fixed commission at the rate of 3% of the sale value of the turmeric as per APMC rules and bye-laws of the APMC Sangli. In a situation where the Appellant is selling the turmeric in the capacity of a "trader", there is no dispute regarding the applicability of GST on turmeric.

The appellant sought an advance ruling on the issue of whether the turmeric in whole form is covered under the definition of "Agricultural Produce" and exempted from GST.

The Authority of Advance Ruling (AAR) ruled that dried and polished turmeric is not covered under the definition of "agriculture produce" and is not exempt from GST. The HSN code of the impugned product is 0910 30 20 and the rate of GST is 5% (2.5% each of CGST and SGST).

The appellant challenged the rulings of the AAR on the grounds that the ultimate consumption of turmeric in spices, in medicinal use or in industrial use is in the form of powder or pest and not in the whole form of turmeric as sold by farmers. Therefore, depending upon the end use and requirements of the consumers, the traders carry out further polishing and other processes after purchasing the turmeric from the farmers.

The AAAR ruled that there is no difference between the essential characteristics of the raw turmeric and the dried turmeric as oil content and curcuminoid content are invariably present in both the samples, though in different concentrations. The difference in the concentration of both the components in raw turmeric and dried turmeric is attributable to the drying of the fresh/raw turmeric having a greater content of moisture. The moisture, which eventually gets removed upon drying during the post-harvesting operation, renders a higher concentration of the components in the dried turmeric.

The AAAR held that dried turmeric (whole) will be classified under the heading 0910 30 20 with a description as "Dried Turmeric (Curcuma)", attracting the GST at the rate of 5%.

Appellant's Name: N. B. Patil

Citation: Advance Ruling No. MAH/AAAR/AM-RM/07/2022-23

Dated: 02/06/2022

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