The Andhra Pradesh Authority for Advance Ruling ( AAAR ) has ruled that support services to agriculture , forestry, animal husbandry not composite supply under Goods and Service Tax law.
The applicant Archipel India Foundation is a social enterprise in India that develops and implements community-based conservation and sustainable agricultural land management projects with small scale farmers. The Applicant is formed for social purposes to assist the people and society and rural development.
The Applicant has entered into a Project Development Agreement with M/s. Shell Energy India Private Limited where, as per Schedule 1 of the said agreement, “Project” has been defined as Afforestation, Reforestation and Revegetation for Sustainable Agriculture and Land Management and Afforestation.
The applicant sought for advance ruling that “whether the activities of the applicant under the agreement can qualify as ‘composite supply under GST law with Principal Supply as “Support services to agriculture, forestry, fishing, animal husbandry” as provided in the SL No 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017 (as amended time to time) having SAC code 9986.”
It was held by the AAR authority that “the applicant, through mara mitras, provides education and training to the farmers for cultivation of plants / trees, by applying scientific research and knowledge which qualifies as agricultural extension services as per the definition. All the other activities of the applicant carried out through mara mitras from selection of saplings to assisting in transportation & planting, to monitoring the survival of plants are related to agricultural extension activity. Thus the services of the applicant are covered under agricultural extension services.”
Debasis Nayak,, Director who is the authorized representative appeared for the applicant.
The two member bench of Authority of Advance Ruling comprising K Ravi Shankar Commissioner of State Tax (Member) and B Lakshmi Narayana IRS, Joint Commissioner of Central Tax (Member) observed that the activities required to be undertaken for the purposes of achieving the Project Objectives are not purely related agricultural activities but also involves activities such as Project Design, Carbon Accounting, Validation, Monitoring, Reporting and Verification, Project Administration, Project Operations, Biodiversity Impact Assessment, Community Engagement etc Hence such activities doesn’t quite fit the definition of support services 9986.
Hence the bench concluded that the applicant wants to make it look like they’re doing good things for the environment, like planting trees. They’re saying it’s a social enterprise. But, behind this seemingly good intention, their main goal is to make a profit from trading carbon credits. They want to benefit from support services to maximize their gains. Understanding the legal situation around carbon credit trading is complex.
Though the worker or activities undertaken by the appellant as per agreement viz., project during doesn’t fall under the support services to agriculture under SI.No.24 of Heading 9986 of Notification No.11/2017-Central Tax(Rate), dated 28th June, 2017
The authority held that the support services to agriculture , forestry, animal husbandry not composite supply under Goods and Service Tax law.
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