“18% GST on Processed Pulses and Agricultural Brokerage”

GST Applicable to Processed Pulses: AAR Ruling

In a recent ruling, the Andhra Pradesh authority for advance rulings (AAR) has declared that processed pulses obtained after dehusking and splitting of grains do not qualify as agricultural produce, thus subjecting them to goods and services tax (GST) at the rate of 18 percent.

Brokerage of Agricultural Produce: 18% GST Ruling

Furthermore, the AAR ruled that brokerage charged for facilitating transactions between wholesalers, millers, or farmers in the agricultural produce sector would also attract an 18 percent GST.

Case Study: Gayatri Enterprises

This ruling came in response to a case involving Gayatri Enterprises, a company based in Andhra Pradesh acting as a broker for agricultural produce such as urad dal, moong dal, toor, jowar, and karamani.

Clarification on GST Applicability

The company charges a fixed brokerage fee per bag from involved parties, but its name does not appear on sale or purchase invoices. Despite obtaining GST registration and charging 18 percent tax, Gayatri Enterprises faced resistance from parties across the country who argued that GST should not apply to agricultural produce and brokerage services.

AAR’s Interpretation

The company sought clarity from the AAR regarding the applicability of GST to its activities, particularly the dehusking and splitting of pulses. In response, the AAR noted that these processes are typically conducted by pulse millers rather than farmers, indicating that dehusked or split pulses do not qualify as agricultural produce.

Impact on Business Operations

While whole pulse grains like whole gram and rajma are considered agricultural produce and exempt from GST, processed pulses fall outside this definition and are thus subject to GST. Additionally, the AAR classified Gayatri Enterprises’ role as a broker in pulses as that of a commission agent, subjecting them to 18 percent GST regardless of whether the goods involved are exempt or taxable under the GST regime.

Conclusion: Understanding GST Applicability

This ruling highlights the complexities of taxation within the agricultural domain and underscores the importance of understanding the nuances of GST applicability in various agricultural activities.