The Appellate Authority of Advance Ruling (AAAR) in Karnataka, while upholding the ruling of the AAR ruled that the transaction of depositing timber with the Government Timber depot for disposal would amount to “supply” within the meaning assigned to it under the GST Act and GST is chargeable on the value of such supply.
The applicant, Tata Coffee Limited is a part of the Tata Group of Companies and is engaged in the business of Coffee /Tea / Pepper plantation. In the plantation, certain trees are grown for the purpose of “shade” of the coffee crops. Shade trees are absolutely necessary for the protection of coffee bushes. It is not possible to grow coffee in India without the necessary shade trees. However, excessive shade trees are also not suitable for coffee growing.
The applicant identifies such excessive trees as part of its shade management policy and the same is cut down to protect the coffee bushes surrounding them from getting damaged. Such trees other than silver oak timber, along with dead standing/ wind fallen trees, but along with Rosewood will be transported to Government Auction Depots as mandated by the provision of the Forest Act for its disposal.
The applicant sought advance ruling on the issue whether the legally binding and prescribed activity of depositing the timber/wood by the applicant with the Government Timber Depot for disposal as per the provision of Section 104 of the Karnataka Forest Act will constitute a “supply” and therefore subject to payment of GST for keeping the goods at the custody of the auctioneer i.e. Government Timber Depot.
The AAR ruled that the transaction of depositing timber with the Government Timber depot for disposal would amount to “supply” within the meaning assigned to it under the GST Act and GST is chargeable on the value of such supply.
“The activity of providing supervision services is not covered under the exceptions in entry 5 of Notification No.13/2017- Central Tax (Rate) dated 28.06.2017, the same is liable to tax under reverse charge and this is subject to the condition that the Government Timber Depots are Government Departments, the applicant is liable to pay tax on the receipt of supervision services. In case the Government Timber Depots are not Government Department then the transaction would not be covered under Notification No.13/2017- Central Tax (Rate) dated 28.06.2017 and such reverse charge mechanism shall not be applicable and the Government Timber Depot shall collect the GST and issue an invoice to the applicant,” the authority further ruled.
The Appellate Authority of Advance Ruling (AAAR) consisting of the members D.P. Nagendra Kumar and M.S. Srikar, upheld the ruling of AAR and held that the transaction of depositing timber with the Government Timber depot for disposal would amount to “supply” within the meaning assigned to it under the GST Act and GST is chargeable on the value of such supply.
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