GST on warehousing of Agricultural produce : Clarification
23rd GST Council Meeting Decision held on 10.11.2017
23rd GST Council Meeting Agenda
Agenda Item 6(vii): Clarification regarding warehousing of Agricultural produce in GST regime
Representations have been received in the Finance Ministry from Calcutta Tea Traders Association
(CTTA), Navi Mumbai Merchant Chamber etc. seeking advice on whether loading, unloading, and
packing or warehousing of Tea/ Jaggery etc. is exempt from GST.
2. It has been stated that as per order No. 1/2002-Service Tax dated 1 August 2002, tea, coffee,
rubber, jaggery, pulses, rice etc. were included in the definition of agricultural produce. Further, as per Circular/ D.O. Letter No. 334/1/2012-TRU dated 16 March 2012 issued by the Joint Secretary (TRU) plantation crops like tea and coffee were also covered under agricultural produce. The same clarification was carried forward in the “Taxation of Services: An Education Guide” released on 20 June 2012. However, the guide did not give any specific reason or justification for the said clarification.
3. As per GST notification No. 11/2017-Central Tax (Rate), Sl.No. 24 and notification No. 12/2017-
Central Tax (Rate), Sl.No.54, dated 28 June 2017, the GST rate on loading, unloading packing, storage or warehousing of agricultural produce is Nil. Similarly, services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce are also exempt.
4. Agricultural produce in the notification has been defined to mean 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 is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market”
5. Tea used for making the beverage, such as black tea, green tea, white tea is a processed product
made in tea factories after carrying out several processes, such as drying, rolling, shaping, refining,
oxidation, packing etc. on green leaf and is the processed output of the same. This processing is not
usually done by cultivators.
6. The tea industry consists of –
i. planters who manufacture tea from their own crop and primarily sell their produce at auctions such as Mcleod Russel, Rossel Tea and Warren Tea etc.
ii. planters-cum-brand owners who have diversified into the packaged tea segment while
selling significant part of their production at the auctions. Ex. Duncans Industries, Harrisons
Malayalam Ltd., Goodricke group Ltd., Jay Shree Tea etc.
iii. brand owners who do not own tea plantations but purchase bulk tea either at tea auctions
or directly from planters. They blend, package and market the tea procured from the domestic
retail market. This category includes Hindustan Lever Ltd. (Taj Mahal, Yellow Label, Red
Label, Taaza etc.), Tata Global Beverages Ltd. (Tata Tea Premium/Gold, Tetley, Good Earth
etc.), Wagh Bakri etc.
6.1 Other entities in the industry include Green Leaf Growers (GLGs) who undertake plantation
activities and sell their crop of green leaf to Bought Leaf Factories (BLFs), planters-cum-brand owners as well as standalone brand owners. BLFs do not own tea estates but produce saleable tea from green leaf purchases. The green leaf is currently selling at Rs. 10 to 15 per kg as against processed black tea, which is auctioned at an upward of Rs. 100 per kg. Though, there are Estate Tea Factories which have captive tea estates as source of green leaves, majority of tea factories in India are Bought Leaf Factories, i.e., they buy green tea leaf from green leaf growers. As reported in Business Line dated 18 September 2017, there are 246 large Estates and 333 Tea Factories (of which 185 have been categories as bought leaf factories and the remaining 148 as Estate Factories).
7. Thus, green tea leaves and not tea is the “agricultural produce” eligible for exemption available
for loading, unloading, packing, storage or warehousing of agricultural produce. Clarification issued in 2002 was in the context of positive list regime of Service Tax, which did not have the same definition of “agricultural produce”. The clarification contained in Education Guide in the context of the Negative List of the services which had the same definition of “agricultural produce” as under Notification No. 12/2017- CT (Rate), has no rational basis.
8. Seen from the view point of tea planters who manufacture tea from their own crop and sell not
green leaf but processed tea in market, it would appear that processed tea in the form it is consumed is an agricultural produce. However, to treat such processed tea as agricultural produce would be the same as treating jam or other processed fruit products manufactured by an owner of fruit orchards as agricultural produce. It has also to be kept in view that there is a primary market for green leaf also. Further, tea produced and sold by bought leaf factories, which buy green leaves and process them, cannot be considered as agricultural produce by any stretch of imagination. Same is the case with coffee obtained after processing of coffee beans.
9. Jaggery is not an agricultural produce. Processing of sugarcane into jaggery changes its essential
characteristics. Pulses commonly known as dal are obtained after dehusking or splitting or both. The process of dehusking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore pulses (dehusked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce.
10. In view of the above, it may be clarified by way of a circular that processed products such as
processed tea (i.e. black tea, green tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split), jaggery etc. fall outside the definition of agricultural produce as given in notification No. 11/2017-CT(R) and 12/2017-CT(R) dated 28.6.2017 and corresponding notifications issued under IGST and UTGST Acts and that any clarification issued in the past to the contrary in the context of Service Tax or VAT/ Sales Tax is no more relevant.
23rd GST Council Meeting Minutes
Agenda item 6(vii): Clarification regarding warehousing of Agricultural produce in GST regime
35. Introducing this Agenda item, the Secretary stated that there were representations
seeking clarification whether loading, unloading, packing or warehousing of tea/jaggery, etc.
were exempt from GST. He stated that as per Serial No.24 in Notification No.ll/2017-Central
Tax(Rate) and Serial No.54 in Notification No.l2/2017-Central Tax (Rate) both dated 28 June,
2017, GST rate on loading, unloading, packing, storage or warehousing on agricultural
produce was Nil. Similarly, services provided by any Agricultural Produce Marketing
Committee or Board or services provided by a commission agent for sale or purchase of
agricultural produce were exempt. He further stated that agricultural produce in the
notification was defined to mean “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 is
usually done by a cultivator or producer which does not alter its essential characteristics but
makes it marketable for primary market”.
35.1. He further explained that tea used for making the beverage, such as black tea, green
tea, white tea was a processed product made in tea factories after carrying out several
processes, such as drying, rolling, shaping, refining, oxidation, packing etc. on green leaf and
that this processing was not usually done by cultivators. He, therefore, pointed out that green
tea leaves and not tea was the agricultural produce and was eligible for exemption available
for loading, unloading, packing, storage or warehousing of agricultural produce. Similarly,
jaggery was not an agricultural produce as processing of sugarcane into jaggery changed its
essential characteristics. Pulses were obtained after dehusking or splitting or both. This
process of dehusking or splitting was not usually carried out by farmers or at farm level but
done by the pulse millers. Therefore, pulses (dehusked or split) were also not agricultural
produce. It was, therefore, proposed to clarify by way of a circular that processed products
such as processed tea (i.e. black tea, green tea, white tea etc.), processed coffee beans or
powder, pulses (dehusked or split), jaggery etc. fall outside the defmition of agricultural
produce as given in notification No. 11 /2017-CT(R) and 12/2017-CT(R) both dated 28 June,
2017 and corresponding notifications issued under JGST and UTGST Acts.
35.2. The Secretary informed that this proposal was also discussed during the meeting of
the officers held on 9 November, 2017 in Guwahati wherein Shri Sanjeev Kaushal, Additional
Chief Secretary, Haryana, and Dr. C. Chandramouli, Additional Chief Secretary (Commercial
Taxes), Tamil Nadu, had suggested that processed spices, processed dry fruits and processed
cashew nuts should also fall outside the definition of agricultural produce. He further
informed that the Additional Chief Secretary (CT), Tamil Nadu, had suggested to remove the
word ‘ etc.’ from the proposed clarification, but CCT, Gujarat, had suggested to retain this
word so that other simi lar products could also get covered in this definition. He
recommended that the Council could agree to the proposal in the Agenda item and also add
dry fruits and spices in the proposed clarification. The Council agreed to the suggestion.
36. For Agenda item 6(vii), the Council approved the proposal to issue a clarificatory
circular that processed products such as processed tea (i.e. black tea, green tea, white tea etc.),
processed coffee beans or powder, pulses (dehusked or split), jaggery, processed spices,
processed dry fruits, processed cashew nuts, etc. shall fall outside the definition of agricultural
produce as given in Notifications No. 11/2017-CT(R) and 12/2017-CT(R) both dated 28 June,
2017 and corresponding notifications issued under IGST and UTGST Acts.
Circular after 23rd GST Council Meeting Minutes on Agricultural produce
This decision Circular No. 16/16/2017-GST dated 15.11.2017 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise & Customs (Tax Research Unit).