Summary of case:
The appellant is engaged in the activity of drilling borewell service to agriculturist. Water is a prime source for the agriculture of crops. Likewise, compressors which are let out by them to agriculturists enable the motor to function and discharge water as required for cultivation and allied agricultural uses. They also obtain a confirmation letter from the agriculturist that the borewell drilled in their land is used only for the agricultural purpose.
The appellant has sought advance ruling in respect of the following questions:
1. Whether the following supply of services provided by the applicant are in relation to agricultural operations directly in connection with raising of agricultural produce:
(i) Drilling of Borewells for supply of water for agricultural operations like cultivation including seeding, planting and ploughing.
(ii) Letting out of compressors for pumping of water from the borewells to the agricultural fields.
2. If the answer to the above question is in the affirmative, whether the said services are covered by the entry SI.No 54 of Notification 12/2017 CT(Rate) dated 28.06.2017?
The advance ruling authority held that :
(i) Drilling of Borewells for supply of water in agricultural land is not a `Support Service for agriculture classifiable under ‘SAC 9986’.
(ii) Letting out of compressors for pumping of water from the borewells to the agricultural field is not a Support Service for agriculture classifiable under ‘SAC 9986’
(iii) The above two activities of the applicant are not ‘Support service for agriculture’ classifiable under SAC 9986 and therefore the exemption at Sl.No.54 of Notification No.12/2017-C.T (Rate) is not applicable to the activities of the applicant.
Being aggrieved from the said ruling the appellant has filed an appeal and stated that the impugned ruling is contrary to law in as much as there is a clear exemption for all activities relating to agriculture and the notification is an expression of the Government’s intention to exempt such activities and similar activities.
The appellant submitted that serial no.54 of Notification No. 12/2017, refers to services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of (a) agricultural operations directly related to the production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing. As per the appellant the list is not exhaustive but is inclusive in nature and similar activities as depicted in the impugned notification would also fall within the ambit of serial no.54 of the said notification.
In the given case it was noted that the appellant has while undertaking the borewell drilling activity for industries etc., (other than on agricultural lands), classified its activity under SAC 995434 leviable to appropriate rate of GST. However, while undertaking the same activity on agricultural lands, the appellant seeks whether the same would fall under SAC 9986 so as to be eligible to fall within the ambit of serial no.54 of Notification No. 12/2017.
In the scheme of things of GST, no two classifications can be adopted for a single activity based on end use or where it is rendered, etc. The appellant himself has classified his supply of services of borewell drilling under 9954 for the purpose of paying the tax. Further since the same equipment is used for the drilling activities, whether on agricultural lands or for industries, etc., it would not be possible for the tax administration to identify whether the driller is exclusively undertaking agricultural drilling only thereby leading to evasion of tax only.
Hence the appellate authority did not find any infirmity in the reasoning of the advance ruling authority with regard to the impugned ruling. With regard to compressor also the appellate authority did not differ from the AAR’s ruling.
CRUX: AAAR do not find any reason to interfere with the order of the Advance Ruling Authority in this matter and held that :-
1. (i) Drilling of Borewells for supply of water in agricultural land is not a `Support Service for agriculture classifiable under ‘SAC 9986’.
(ii) Letting out of compressors for pumping of water from the borewells to the agricultural field is not a Support Service for agriculture classifiable under ‘SAC 9986’
2.The above two activities of the applicant are not ‘Support service for agriculture’ classifiable under SAC 9986 and therefore the exemption at serial no.54 of Notification No.12/2017-C.T (Rate) is not applicable to the activities of the applicant.