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As the GST law has been revised, it is pertinent to note down what all issues still remain un-tackled or untouched. Also certain provisions are there which are yet again drafted in such a way that they would attract litigation. Here we are discussing two such provisions:

1. Starting with the definition of agriculture, its scope has been restricted largely in the GST regime. The proposed definition is reproduced here below:

2(7) “agriculture" with all its grammatical variations and cognate expressions, includes floriculture, horticulture, sericulture, the raising of crops, grass or garden produce and also grazing, but does not include dairy farming, poultry farming, stock breeding, the mere cutting of wood or grass, gathering of fruit, raising of man-made forest or rearing of seedlings or plants;

Also 2(8) define Agriculturist as a person who cultivates land personally, for the purpose of agriculture.

These two definitions when read together restrict the scope of any activity to be called an agricultural activity to a large extent. The exclusive definition of Agriculture brings into tax ambit the activities of dairy farming, poultry farming, and stock breeding into GST net.  Similarly for claiming exemption from agriculture activity the Agriculturist is required to cultivate land PERSONALLY.

The definition is further given under Section 2(106) about cultivate land personally which is as under:-

(106) “to cultivate personally” means to carry on any agricultural operation on one’s own account- (a) by one’s own labour, or (b) by the labour of one’s family, or (c) by servants on wages payable in cash or kind [(but not in crop share)] or by hired labour under one’s personal supervision or the personal supervision of any member of one’s family; 

Explanation 1. - A widow or a minor or a person who is subject to any physical or mental disability or is a serving member of the armed forces of the Union, shall be deemed to cultivate land personally if it is cultivated by her or his servants or by hired labour.

Explanation 2. - In the case of a Hindu Undivided Family.
While it can be assumed that Indian economy being largely dependent on the agriculture, it will be exempted from the levy of GST as is exempted currently from the indirect taxes, it seem that the exemption will be provided only to specific sectors. Also the definition of agriculturist has been restrained to individual men, which means any kind of organized practice would be subject to stringent GST provisions.
It is highly advisable that this should be looked into as it would cause irreparable damage to agriculture sector that is already going through rough weather. Land shall be deemed to be cultivated personally, if it is cultivated by any member of such family.

2. Another definition which is very prone to litigation is the definition of Composite Supply appearing in Section 2(27), Mixed Supplies in Section 2(66) and Principle supply in 2(78). The definitions are reproduced here below for ready reference:
“composite supply” means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply;
The concept of composite supply is on the lines of bundled services and mixed supply and principal supply are new terms coined. Even currently these types of activities are always subject to litigation where tax rates are different due to abatement and exemptions. The language of definitions itself is quite confusing and it is suggestible that in classification in tax schedules this could be considered appropriately. Especially the hotel sector, FMCG sector are places where these will of uttermost importance and should be dealt accordingly.


Published by

Pradeep Jain
(Chartered Accountant)
Category GST   Report

1 Likes   12 Shares   8043 Views


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