INSIGHT INTO THE DRAFT GOODS AND SERVICES ACT, 2016:-

GST Update 12.01.2016

GST DAILY DOSE OF UPDATION:-

INSIGHT INTO THE DRAFT GOODS AND SERVICES ACT, 2016:-

The draft of Goods and Services Act, 2016 has been released on internet but there is doubt about its authenticity. Nevertheless, the provisions of the said Goods and Services Act, 2016 are being taken up for discussion in context with provisions prevalent in force.

Agricultural Produce has been defined under section 2(7) of the Goods and Services Act, 2016 as ‘any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market’.

It is worth observing that exactly same defination is presently there under section 65B (5) of the Finance Act, 1994 thereby indicating that there would be less change in the exemptions available to agricultural produce. The intention of the government has always been to exempt the agricultural produce and services in relation to the same from levy of taxes as it is one of the essential commodities for the public at large. However, this defination has been an issue for litigation even in the negative list tax regime as the Hon’ble Finance Minister vide a letter clarified that rice and cotton cannot be termed as an agricultural produce and so the services related to rice and cotton are not covered by the negative list and this was justified by stating that intention of the government is to cultivator or producer. However, the phrase “make it marketable for primary market” was ignored. Subsequently, the amendment was made in the mega exemption notification specifically providing exemption to services of loading/unloading or storage/packing of rice. This amendment further gave rise to more doubts as there are certain items that are classifiable as agricultural produce but would not be covered by the defination of agricultural produce like pulses wherein processing of removing husk is undertaken in the factories and not by cultivator/producer. We have also written an article on the subject titled "Agricultural Produce-Harvest for Consultants" which was published on taxindiaonline and can be viewed by visiting our website www.capradeepjain.com or by clicking on the link http://www.new.capradeepjain.com/redirect_artleview_250

Instead of ending the cause of litigation, it appears that the government is importing the seeds of litigation again in the new taxation reform GST too. If the defination of agricultural produce as incorporated in the service tax laws is imported in the GST regime also, it will lead to Tribunals and Courts flooding with litigation because the doubts that are prevalent currently will be imported in the new taxation regime as it is. Moreover, there will be fight among assessees regarding a number of items like pulses, wheat, green tea etc. that whether the same would be covered by the term agricultural produce and would enjoy a relatively lower rate of GST.

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GST Update 12.01.2016

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