Seed and Grain are treated differently under GST Law: No GST Concession available to Seeds, says AAR [Read Order]

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The Telangana bench of the Authority for Advance Rulings (AAR) has held that the both seeds and grains are treated differently under the Goods and Services Tax law and therefore, no GST concession is available seeds.

The applicant M/s. Ganga Kaveri Seeds Pvt. Ltd approached the AAR stating that they produce seeds namely maize, paddy, sunflower, bajra, wheat, cotton, jute, sorghum, mustard etc., That the production and sale of the seeds involves cleaning, grading, treatment with pesticide/insecticide, packing and storing the same.

The two-judge bench comprising Mr. S V Kasi Viswesara Rao (Additional Commissioner, State Tax) and Mr. B Raghu Kiran (Additional Commissioner, Central Tax) observed that the Seed Act, 1966 defines seed at Section 2(11) as: “Seed” means any of the following classes of seeds used for sowing or planting- (i) Seeds of food crops including edible oil seeds and seeds of fruits and vegetables; (ii) Cotton seeds; (iii) Seeds of cattle fodder; And includes seedlings, and tubers, bulbs, rhizomes, roots, cuttings, all types of grafts and other vegetatively propagated material, of food crops or cattle fodder;”

“Thus all grain do not qualify to be seed. Further the sale and purchase of ‘seed’ is subject to the provisions of Seed Control Order, 1983 and any deviations from the control rules contained in the said order are punishable under the law. Even in the context of GST law, ‘Seed’ is treated separately from ‘grain’. Therefore seed is included at Serial No. 79 of Notification No. 02/2017 dated: 28.06.2017 wherein exemption is accorded to ‘all goods of seed quality’,” the bench said.

While concluding the order, the bench clarified that “clearly GST law also makes a distinction between grain and seed, therefore even if grain is taxable it will be exempt if it is of seed quality. For example: Serial No. 65 of Notification No. 01/2017 clearly states that tax can be levied @5% on Ground-nuts, not roasted or otherwise cooked, whether or not shelled or broken other than of seed quality. Thus groundnut is taxable in grain form and not in seed form. Hence seed and grain are not one and the same. The law applicable to grain and seed will be different and therefore concessions applicable to grain produced by a cultivator will not be applicable to seed.”

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