I. Nature of Services rendered by APMC
1 APMC are constituted under various State legislations. For the purpose of this Act, I have considered the provisions of Maharashtra Agricultural Produce Marketing (Development and Regulation) (MAPMRT) Act, 1963. APMC is a Market Committee constituted under section 11 of The Maharashtra Agricultural Produce Marketing (Development and Regulation) (MAPMRT) Act, 1963. Thus it is established by the State Government and is a creature of the State Government for discharging various statutory functions.
2 The object of the said Act is to develop and regulate marketing of agricultural and certain other produce in market areas and markets (including private markets and farmer-consumer markets) to be established therefore in the State; to confer powers upon Market Committees to be constituted in connection with or acting for purposes connected with such markets & to establish Market Fund for purposes of the Market Committees. Section 12, sub-section (2) states that notwithstanding anything contained in any law for the time being in force, every Market Committee shall, for all purposes, be deemed to be a local authority. Hence, assessee is a local authority for all purposes. However it does not fall specifically within the definition of local authority u/s. 2(69) of the CGST Act.
3 Hence assessee being a local authority can exercise various powers relating to establishment of law and order etc. by permitting establishment of various infrastructural facilities like banks, police station etc. in the market yard for meeting the objects of the Act.
4 To understand the various services rendered by the APMC it is essential to appreciate the scheme of the Act.
5 Section 29 lays down the Powers and duties of Market Committee. Sub-section (1) of Sec. 29 states that it shall be the duty of a Market Committee i.e., to implement the provisions of this Act, the rules and bye-laws made there under in the market area; to provide such facilities for marketing of agriculture produce therein as the Director [the State Marketing Board or the State Government, as the case may be,] may, from time to time, direct; do such other acts as may be required in relation to the superintendence, direction and control of market or for regulating marketing of agriculture produce in any place in the market area, and for purposes connected with the matters aforesaid, and for that purpose APMC may exercise such powers and perform such duties and discharge such functions as may be provided by or under this Act. Hence, APMC has to discharge statutory duties enshrined in the Act, Rules & Bye-laws. Some of the important duties discharged by APMC are as under :
a. Regulate the entry of persons and of vehicular traffic into the market;
b. Grant, renew, refuse, suspend or cancel licence;
c. Maintain and manage the market including admissions to and conditions for use of, markets within the market area;
d. Provide for necessary facilities for the marketing of agriculture produce within the market in the market area;
e. Regulate and supervise the auctions of notified agricultural produce.
f. Subject to the provisions of section 12, acquire, hold or dispose of any movable or immovable property for the purpose of efficiently carrying out its duties;
g. Levy, take, recover and receive charges, fees, rates and other sums or money to which the Market Committee is entitled;
Hence, the APMC has to perform various statutory duties for which it recovers fees, charges, etc.
6 As per section 6 of the Act, no person shall, on and after the date on which the declaration is made under sub-section (1) of section 4, without, or otherwise than in conformity with the terms and conditions of, a licence (granted by the Director when a Market Committee has not yet started functioning; and in any other case, by the Market Committee) in this behalf –
(a) Use any place in the market area for the marketing of the declared agricultural produce, or
(b) Operate in the market area or in any market therein as a trader, commission agent, broker, processor, weighman, measurer, surveyor, warehouseman or in any other capacity in relation to the marketing of the declared agricultural produce.
For the purposes of Sec. 6, under Sec. 7, a market Committee may, after making such inquiries as it deems fit, grant or renew a licence for the use of any place in the market area for Marketing of the agricultural produce or for operating therein as a trader, commission agent, broker, processor, weighman, measurer, surveyor, warehouseman or in any other capacity in relation to the marketing of agricultural produce; or may, after recording its reasons in writing therefore, refuse to grant or renew any such licence. As per Sec. 7(2) such licence is granted after receipt of fees.
7 As per Sec. 60, the State Government may, by notification in the Official Gazette, make rule for carrying into effect the purposes of this Act. Every rule made under this section shall be laid, as soon as may be after it is made, before each House of the State Legislature. Hence, the Rules are part and parcel of the Act and are made by the State Government.
8 As per Sec. 60(1), subject to any rules made by the State Government under section 60 and with the previous sanction of the Director or any other officer specially empowered in this behalf by the State Government, the Market Committee may in respect of the market area under its management make bye-laws for determining the quantity of agricultural produce for the purpose of its retail sale, for the regulation of the business (including meeting, quorum and procedure of the Market Committee) and the conditions of trading in the market area, including provision for refund of any fees levied under this Act.
9 Sec. 94 of the Act states that after paying all sums to the Government, a Market Committee shall, so far as the funds at its disposal permit, but subject to the provisions of the Act and these rules, provide-
(1) For the maintenance and improvement of any enclosure or building which may constitute the market;
(2) For the construction and repair of building
(3) For undertaking developments and for amenities in the market.
10 Rule 95 provides for allotment of shops, galas, sheds, plots or any other premises for the purposes of sale and purchase of agricultural produce or such other purpose directly or indirectly connected with the sale and purchase of agricultural produce. Hence, the activity of allotment of vacant land with structure, i.e. to say galas, etc. is a statutory duty to be performed by the assessee for achieving the objects of the act.
11 As per Rule 109, the Market Committee may, subject to the provisions of the Act and the rules but subject always to the availability sufficient surplus funds at its disposal, undertake any of the functions such as organisation of conferences, exhibitions, study tours grading, standardisation or any other activity which is likely to further the efficient regulation of marketing of declared agricultural produce and spend funds for the purposes with the previous approval of the Director or the officer authorised by him in that behalf. Hence, the assessee can organise exhibitions for achieving the object of the Act & also collect fees / charges for organizing the same.
12 Rule 120 permits a Market Committee to make bye-laws in respect of charges for weighment on a weighbridge.
13 Based on the above scheme of the Act, the APMC collect following fees/charges/consideration :
Gala Deposit/Lease premium : It is either refundable interest free security deposit or Lease premium charged from Gala holders for meeting the costs of construction of Gala.
Gala Rent : It is monthly rent charged from Gala Holders.
Market rent – rent of vacant land charged from vendors of agricultural produce who do not have gala.
Licence fees, Licence renewal fees – Pertain to grant of Licence.
Gate fee or Vehicle entry fee – Charges for bringing cattle or vehicles with agricultural produce.
Market fees – Commission on sale and purchase of agricultural produce in market yard.
Maintenance Charges – Charges from Gala holders for common maintenance expenses.
II. Applicability of Goods and Services Tax Act to APMC under Central Goods and Services Tax Act, 2017 and Maharashtra Goods and Services Tax Act, 2017
1 Notification 12 of 2017 of the Ministry of Finance dated 28th June, 2017 lays down the list of services that have been exempt from Goods and Services Tax in exercise of the powers conferred by Section 11(1) of the Central Goods and Services Tax Act, 2017.
2 By virtue of Section 11(4) of the Maharashtra Goods and Services Tax Act, 2017 the supply of services which are exempt under Central Goods and Services Tax Act in exercise of the power conferred on it under Section 11 of the said Act would also be exempt under the Maharashtra Goods and Services Tax Act, 2017.
3 Hence list of Services mentioned under Notification 12 of 2017 will be exempt from CGST as well as MGST.
4 Services by APMC are covered in the said list. The said Notification under the heading 9986 provides as under :
“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 production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;
b) Supply of farm labour
c) Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
d) Renting or leasing of agro machinery or vacant land with or without structure incidental to its use;
e) Loading, unloading, packing, storage or warehousing of agricultural produce;
f) Agricultural extension services;
g) Services by any Agricultural Produce Market Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.
5 Services by APMC were covered by the negative list under the Service Tax regime. The relevant portion of Section 66D of Chapter V of the Finance Act, 1994 which deals with negative list is reproduced as under:
(d) Services relating to agriculture by way of—
(i) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;
(ii) Supply of farm labour;
(iii) Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
(iv) Renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
(v) Loading, unloading, packing, storage or warehousing of agricultural produce;
(vi) Agricultural extension services;
(vii) Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.
6 On comparison of the portion relevant for APMC contained in Notification 12 of 2017 and Section 66D of the Finance Act, 1994, it can be seen that the provisions of both the erstwhile Services Tax and the current Central Goods and Services Tax Act, 2017 relating to services provided by APMC are in pari-materia. Therefore, in our view the jurisprudence with respect to the interpretation of the negative list of services in the Service Tax regime will continue to apply in the GST regime.
7 Under the Service Tax regime, as per the CBEC guide, the scope of negative list has been examined by the Board in the Education Guide dated 20-6-2012. Para 4.4.9 of the said Guide states as below:-
4.4.9 Would leasing of vacant land with greenhouse or a storage shed meant for agricultural produce be covered in the negative list?
Yes. In terms of the specified services relating to agriculture leasing of vacant land with or without structure incidental to its use? is covered in the negative list. Therefore, if vacant land has a structure like storage shed or a greenhouse built on it, which is incidental to its use for agriculture then its lease would be covered under negative list entry.
Further, on APMCs, in Para 4.4.11 the guide clarified as below:-
4.4.11 What are the services referred to in the negative list entry pertaining to Agricultural Produce Marketing Committee or Board?
Agricultural Produce Marketing Committees or Boards are set up under a State Law for purpose of regulating the marketing of agricultural produce. Such marketing committees or boards have been set up in most of the States and provide a variety of support services for facilitating the marketing of agricultural produce by provision of facilities and amenities like, sheds, water, light, electricity, grading facilities etc. They also take measures for prevention of sale or purchase of agricultural produce below the minimum support price.
APMCs collect market fees, licence fees, rents etc. Services provided by such Agricultural Produce Marketing Committee or Board are covered in the negative list. However any service provided by such bodies which is not directly related to agriculture or agricultural produce will be liable to tax e.g., renting of shops or other property.
8 Further, the scope of the taxability of services by APMC as per the Negative List came up for consideration before the CESTAT Principal Bench, New Delhi in “M/s Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, Jaipur-I & II” wherein it was held that various services of APMC including renting of gala was not liable to service Tax. However, renting of immovable property to banks, general shops etc. will be liable to service tax. The relevant portion of said decision is as under-
“12. Accordingly, we hold that the appellants are not liable to service tax on renting of immovable property used for storage of agricultural produce in the market area. In this connection, we refer to paras 161 and 162 of the Budget Speech of the Hon”ble Finance Minister while introducing Budget 2012-13. The same is extracted as below:-
161. The important inclusions in the negative list comprise all services provided by the Government or local authorities, except a few specified services where they compete with private sector. The list also includes pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation including Inland waterways, urban railways and metered cabs.
162. Agriculture and animal husbandry enjoy a very important place in our lives. Practically all services required for cultivation, breeding, production, processing or marketing up to the stage the produce is sold in the primary markets are covered by the list.
13. It is mentioned that practically all services required for cultivation, breeding product, processing or marketing up to the stage the produce is sold in the primary markets are covered by the list. In the present case, we note that we are dealing with the shops and land given out on rent, which are in the primary market areas, where agricultural produce are brought for sale. The allotment stipulates that the shops/godown shall be used for business of notified commodities and licence is issued by the Market Committee. As such, the premises in the primary market areas are let out with reference to agricultural produce, their storage/warehousing, etc. During the course of arguments, the ld. Counsel for the appellants submitted that they are not disputing their service tax liability with reference to renting of
shops etc. given to commercial establishments like banks, general shops etc. In fact, they are discharging service tax on the same.
14. We have examined the scope of entry in the negative list along with various clarifications issued by the Government. On harmonious construction of all material facts on record, we find that the appellants are not liable to service tax on shops/sheds/platforms/land leased out in the notified market area for traders for temporary storage of agricultural produce traded in the market. In respect of shops, premises, buildings, etc. rented/leased out for any other commercial purpose other than with reference to agricultural produce (like bank, general shop etc.), the same shall not be covered by the negative list and the appellants shall be liable to service tax.
15. In view of the above position, we find that the appellants are not liable to service tax for the period after 1-7-2012.”
9 In the light of the above provisions, CBEC Guide under service tax and decision of the Tribunal in Krishi Upaj (supra), the applicability of GST to various services provided by the APMC are as under:
|Particulars of Income/receipt||Chargeability|
|Gala Deposit||Gala Deposit is nothing but interest free refundable security deposit. Same is not rent. Said amount is not exigible to GST. However, where Rent from shop is taxable, it may become a debatable issue if said deposit becomes part of taxable value of services.|
|Gala Rent||It is not exigible to tax if gala is allotted to store agricultural produce. Otherwise same is taxable.|
|Rent of land (Bazar)||It is not exigible to GST.|
|Transfer Fees||It is not exigible to GST.|
|Licence Fee||It is not exigible to GST.|
|Licence Renewal Fees||It is not exigible to GST.|
|Gate Fee||It is not exigible to GST.|
|Vehicle entry fee||It is not exigible to GST.|
|Maintainence Charges||It is not exigible to GST.|
|Market Fees||It is not exigible to GST.|