Is GST applicable to Dry Red Chillies purchased directly from the Farmers and sold directly to buyer

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Shivkumar Swamy (Querist)
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30 December 2024 Sir, we are commission agents in APMC in bangalore. we buy directly the Dry Red Chillies from Andra and sale to the buyers in kolkotta for export. we get the money directly in to our bank account and same is paid to the farmers immediatly.

My question,
1. do we need to pay RCM for the Dry Red Chillies purchased from the Farmers?
2. do we need to charge GST to the buyers in Kolkotta

Shivkumar
9845845151

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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12 August 2025 Hi Shivkumar ji,
Thanks for your clear and detailed question. You're dealing in dry red chillies, purchased directly from farmers in Andhra Pradesh, and sold to buyers in Kolkata for export. You act as a commission agent in the APMC and receive money directly into your account, which you then pay to farmers.

Let’s break this down into your two main GST questions:

✅ 1. Is RCM applicable on purchase of Dry Red Chillies from farmers?
Answer: ❌ No, RCM is not applicable if you're purchasing agricultural produce directly from farmers.
Reason:
As per Notification No. 12/2017-Central Tax (Rate), entry 54:
Services by way of cultivation, supply, or sale of agricultural produce by the cultivator (i.e., farmer) are fully exempt.
Also, dry red chillies are considered agricultural produce if no further processing is done that changes its essential characteristics (like grinding or value-addition).
Therefore, when you buy directly from farmers, there is:
No GST liability, and
No RCM applicable on that purchase.
✅ You're safe on RCM as long as the seller is an unregistered farmer.
✅ 2. Do we need to charge GST to buyers in Kolkata?
This depends on how the supply is structured. Let’s look at two possibilities:
🔹 Case A: You are buying and selling on your own account (i.e., not acting as a pure commission agent)
You are receiving sale proceeds into your bank account and paying farmers — this indicates that you are the actual supplier.
In that case, you are liable to charge GST.
GST Rate on Dry Red Chillies:
As per Notification 6/2022-CT (Rate), GST is 5% **if the dry chillies are sold in branded and packaged form.
If sold loose or unbranded, then exempt.
👉 So if you're selling loose dry red chillies (unbranded) — no GST to be charged.
👉 If sold in unit container + with brand name — then 5% GST must be charged.
🔹 Case B: You are acting as a Commission Agent (pure agent model)
If you're acting purely as an agent, and do not take ownership of goods, then the principal (the farmer or exporter) is responsible for GST.
However, you will still need to charge GST on your commission income, if you're registered.
In your case, since you receive full sale amount and then pay the farmer, it appears you're not a pure agent, but acting as the seller. So GST implications will apply accordingly.
✅ Summary:
Question Answer
1. RCM on purchase from farmer? ❌ No RCM applicable if purchased from unregistered farmers (agricultural produce exemption applies)
2. GST to be charged to Kolkata buyer? ✅ Yes, if sale is in your name — but only if sold in branded/packaged form (5%). If unbranded & loose → ❌ Exempt
Commission income GST? ✅ GST applicable on commission earned, if you’re registered

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