Providing services for planting mangrove seeds and seedlings in coastal areas attracts 18% TPS: AAR
The West Bengal Advance Ruling Authority (AAR) ruled that the provision of services for the planting of mangrove seeds and seedlings in coastal areas would incur a GST of 18%.
The bench of two members of Brajesh Kumar Singh and Joyjit Banik observed that no GST is payable on the provision of services for the cultivation, planting and maintenance of fruit trees.
The applicant is engaged in the business of cultivation, planting and maintenance of fruit trees in marginalized areas, as well as seeds and seedlings of mangroves in the coastal areas of different states of the country with the sole purpose of protecting the environment against climate change. The applicant carries out the activities in accordance with contracts awarded by internationally renowned environmental organizations.
The applicant requested an advance ruling regarding the SAC code and GST rate for the foreign supply made by the applicant, in the case of fruit trees grown and maintained in marginalized communities.
Another issue raised concerned the SAC code and GST rate for the outbound supply made by the claimant, in the case of mangroves grown and maintained in coastal communities.
The applicant claimed that while aiming to improve biodiversity and restore ecosystem function to protect the islands and people from erosion by planting mangrove seeds and seedlings, it also aims to create ways to sustainable livelihoods and provide nutritious food to families and the community. residing in nearby plantation activities.
The petitioner argues that the Supreme Court explained in depth what constitutes the term “agriculture” in CIT v. Raja Benoy Kumar Sahas Roy. This is a landmark case for the understanding of the term “farming” under the Income Tax Act. The judgment clarifies that the term “agriculture” is cultural, that is to say the cultivation of agar, that is to say the field or the earth. Raising a product through the use of human skills and labor on the land can be classified as an agricultural activity. The product must have some utility, either for consumption or for trade and commerce. The term “agriculture” is given a broader interpretation both in terms of its operations and the results of those operations.
The department argued that the service provided for other environmental protection services that are not elsewhere classified will fall under subheading of Chapter 999490 and incur 18% GST.
The AAR, while agreeing with the department’s assertion, said the plaintiff does not provide services for food, fiber, fuel, raw materials, or other similar agricultural commodities or products. Rather, the sole purpose of the services, as claimed by the applicant, is to enhance biodiversity and restore ecosystem function in order to protect the islands and people from erosion.
“We are therefore of the view that these services can be treated as environmental protection services under heading 9994 and should not be covered by heading 9986, namely support services to agriculture, forestry, fishing and animal husbandry,” the AAR said.
Applicant Name: Raj Mohan Seshamani
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