Commission on Selling arrangement for Promoting, Marketing and Selling of Birds and Handling Sale Administration Not Exempted from GST: AAR [Read Order]

The Maharashtra Authority for Advance Rulings ( AAR ) has held that the 10% commission received for promoting, marketing, and selling birds, as well as handling sale administration, is not exempted from Goods and Services Tax ( GST ) as per entry number 54 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017.

An application was filed by VHPL, the flagship company of the Venkateshwara Hatcheries Group (VH Group), which has been a pioneer in the poultry industry for over four decades. Established in the 1970s, VH Group is Asia’s largest fully integrated poultry enterprise engaged in breeding, hatching, manufacturing poultry vaccines and medicines, and conducting advanced research in poultry sciences.

VHPL, incorporated in 1971, is registered under the CGST Act, 2017, and operates across India with multiple GST registrations. The company entered into agreements with Venkateshwara Research and Breeding Farm Limited (VRBFL) and Venco Research and Breeding Farm Limited (Venco) to provide three categories of services: (i) selling arrangements involving the promotion, marketing, and sale of birds, (ii) veterinary services such as assistance in creating a hygienic environment, providing vaccination, and ensuring proper bird growth, and (iii) laboratory testing and analysis services related to feed, water, and overall poultry health.

As per these agreements, VHPL receives consideration in the form of commission and service charges, 10% of the sale value of parent stock for selling arrangements, 3% for veterinary services, and 7% for laboratory testing services.

The question before the AAR was whether the commission on selling arrangements could be treated as exempt from GST on the grounds that it pertained to activities associated with live animals, which are generally considered outside the scope of taxable supplies in certain agricultural contexts.

However, the AAR clarified that the promotion, marketing, and sale of birds fall squarely within the definition of “supply of services” under Section 7 of theCGST Act, 2017. It further noted that birds cannot be treated as “agricultural produce” as defined under GST Act, since they are not products that have only undergone processes normally carried out by a cultivator or producer to make them marketable.

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As such, the exemption available to commission agents dealing with agricultural produce was held to be inapplicable. Instead, the commission for these services was classified as taxable under Service Accounting Code (SAC) 9961/9997, which attracts GST at the standard rate of 18%.

The bench of D.P. Gojamgunde and Priya Jadhav also rejected the argument that the reverse charge mechanism (RCM) could apply, clarifying that since birds are not agricultural produce, the liability to pay GST on such commission rests with the service provider and not the recipient.

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