The GST-Authority for Advance Rulings (AAR) Maharashtra panel has ruled that turmeric is a “spice” that is taxed at 5%. Turmeric was recently brought before the bench to see if it might be exempted as a ‘agricultural produce.’ The GST-AAR panel, on the other hand, ruled that the whole turmeric had been cleaned by boiling and then dried and polished by farmers before being sold.
This is in direct contradiction to a Gujarat court order. On the other hand, the Karnataka bench recently ruled that eggs (in their uncooked form) are an agricultural commodity and so GST-free.
Nitin Bapusaheb Patil, the applicant in this case, was a commission agent, as defined under the state’s Agricultural Produce Market Committee (APMC) laws. In the presence of farmers and traders, he was to conduct an auction under the supervision of an APMC inspector. If the farmer accepted the auction price, he continued to operate as an intermediary, facilitating the delivery of the dried and polished whole turmeric. According to the APMC guidelines, he received a predetermined commission of 3% from the merchants for such services. He also wanted to know if his auxiliary services would be excluded from GST in his application to the AAR.
“Agricultural production” is defined as any product obtained from the cultivation of plants and the rearing of all living forms (excluding horses) for food, fibre, fuel, raw material, or other similar items, according to notice No. 12/2017 dated June 28, 2017. The notification further states that no additional processing should be done on such goods, or that any processing done by the farmer or producer should not affect the produce’s core features while making it more marketable for the primary market.
Several court and quasi-judicial precedents were cited by the petitioner. He cited the Supreme Court, which had ruled in two cases that certain agricultural products require some cutting or processing in order to be marketable. The product would remain an agricultural product if it is modest and does not result in product change.
The GST-AAR panel, on the other hand, found that the applicant had failed to show that the farmers carried out the specialised process of boiling, drying, and polishing, which required the use of machinery, on their own property. It wasn’t “fresh” turmeric, so it would be taxed at 5%. As a result, the commission agent’s services would be taxable as well.