Red Gram Dal Supplied via HACA to Non-Commercial Industrial or Institutional Consumers Not Subject to GST: Telangana AAR [Read Order]

In a recent ruling, the Telangana Authority for Advance Ruling ( AAR ) ruled that the Red Gram Dal supplied through Hyderabad Agricultural Cooperative Association Limited ( HACA ) to Non-Commercial Industrial or Institutional Consumers are not subject to Goods and Services Tax ( GST ).

The applicant M/s. Narayan Trading Corporation, a long-standing taxpayer under the CGST & SGST Act, 2017, specializing in the trading of essential commodities, recently sought clarity from the AAR regarding the GST implications of their supplies to the Department for Women, Children, Disabled & Senior Citizens via the HACA.

The applicant, with over three decades of experience in the industry, supplies goods to HACA, an apex cooperative marketing society established in 1949 to serve the farming community of the erstwhile State of Hyderabad. The association, operating under the Multi-State Cooperative Societies Act 1984, acts as a nodal agency for procurement on behalf of various government departments.

The key questions posed before the AAR were:

1. Whether the Department for Women, Children, Disabled & Senior Citizens falls under the definition of “industrial consumer or institutional consumer”?
2. Whether the goods supplied through HACA to the Department attract GST?

The bench noted that the Department for Women, Children, Disabled & Senior Citizens, in collaboration with HACA, initiated a tender for the procurement of Red Gram Dal. HACA, appointed as the nodal agency by the Department through official notification, is responsible for ensuring the timely and qualitative supply of Red Gram Dal to various Integrated Child Development Services ( ICDS ) projects across the state.

Thus HACA is an agent on behalf of The Department for Women, Children, Disabled & Senior Citizens who is the principal who as nominated HACA as a nodal agency for the specific purpose of calling for tenders on behalf of the principal and ensuring proper qualitative and timely supply of Red Gram Dal.

According to the applicant, the Department qualified as an institutional consumer, as per GST regulations, since the packaged commodities are acquired directly from manufacturers or wholesale dealers for internal use and not for commercial purposes.

The two-member bench of S.V. Kasi Visweswara Rao and and Sahil Inamdar noted that “the supplies made to institutional consumers meeting specific criteria, such as bearing a “not for retail sale” declaration and being used solely for institutional purposes, are exempt from CGST & SGST.”

With regards to the 1st issue, the AAR bench declared that the Department for Women, Children, Disabled & Senior Citizens will be covered under the definition of “industrial consumer or institutional consumer”. With regards to 2nd issue, the goods supplied by the applicant through the Nodal Agency – Hyderabad Agricultural Co-operative Association Limited ( HACA ) do not attract GST. However, the both is possible on following conditions:

1. The packaged commodities are bearing a declaration ‘not for retail sale”.
2. The purchase is made directly from the manufacturer or from an importer or from wholesale dealer
3. The purchase is made for use by that institution and not for commercial or trade purpose

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