03/03/2022
SEEDS ARE NOT AGRICULTURE PRODUCE AND HENCE LIABLE FOR GST
In an interesting judgement the Telangana Authority of Advance Ruling (AAR) has considered that seeds are *not “agricultural produce”* and should attract GST, probably a development that could create additional liability for the *agriculture sector* as “seed” is treated separately from “grain”.
The law therefore *applicable to grain and seed will be different* and the concessions applicable to grain produced by a cultivator will not be applicable to seed, said the ruling in the case of Ganga Kaveri Seeds and Narasimha Reddy & Sons. Applying, the *ejusdem generis* principle ie., where general words follow a list of particular things, the general words are restricted to matters of the same kind as those specifically listed.
These rulings held that raw material used in definition of agricultural produce *is confined to food, fibre, etc., which can be consumed*, and as seeds are not consumed but cultivated, and the same are liable to GST.
In the *definition of agricultural produce, ‘raw material’* is used which is a general term and is in the company of specific words such as food, fibre and fuel. These specific words indicate *direct consumption by humans* or in industry but not in cultivation, the AAR ruled.
These specific words *indicate direct consumption by humans or in industry* but not in cultivation – supply of seed *does not fall under the definition of agricultural produce* as the seed *does not fulfil the utilities prescribed* therein.
*Auxiliary supplies* like Storage of the seeds in the leased storage facility or godowns, loading, unloading and packing of seeds by the on any basis are *not exempt from payment of GST*.
In *common parlance,* one would tend to perceive seeds to be agricultural produce and hence not liable to GST. *But this is contrary to that perception*.
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