Eggs are farm produce, transporting them is exempt from GST: Karnataka AAR

The ruling was pronounced on an application by SAS Cargo, which transports eggs and hatcheries by rail

The authority of advance ruling (AAR), Karnataka has ruled that eggs are agricultural produce and transporting them from one place to another would not draw any goods and services tax (GST), despite the tax authorities arguing for its taxability.

The ruling was pronounced on an application submitted by SAS Cargo, which is engaged in the business of transportation of eggs and hatcheries by rail.  

The AAR sought to know the government's position from the office of the commissioner of central tax, Bengaluru South gst commissionerate, Bengaluru.

The assistant commissioner replied that according to the GST laws, agricultural produce is any produce out of cultivation of plants and rearing of all forms of animals, except the rearing of horses, on which either no processing is done or such processing is done which does not alter its essential characteristics.

However, production of eggs appears to be a commercial enterprise and not an agricultural activity, he said. The office was of the view that GST laws and clarifications given under them are intended to give relief to farmers who in addition to cultivation may take certain agro-based activities such as animal husbandry, pisciculture and sericulture.

The office was of the view that eggs fall beyond the scope of agricultural produce, according to the intention of the GST laws and explanations.

However, AAR ruled that eggs on which no further processing is done are covered under the definition of agricultural produce, according to the classification made by the Central Board of Indirect Taxes and Customs (CBIC). It also ruled that services for transporting eggs are exempt from GST.

Commenting on the judgement, Harpreet Singh, partner, indirect taxes at KPMG in India, said it is important to understand the nature of process being undertaken on agricultural products to determine if the same classifies as ‘agricultural produce’ or not under GST.

"Generally, where no artificial process is done and the produce can be used, supplied as it is, without any further processing, the same is likely to qualify as ‘agricultural produce’," he said.