GST Ruling on Commission for Promoting and Selling Birds: A Comprehensive Guide
The Maharashtra Authority for Advance Rulings (AAR) has clarified that the 10% commission for promoting, marketing, and selling birds is taxable under GST. This article provides a detailed explanation of the ruling and its implications.
GstPoultryCommissionAarMaharashtraReal EstateSep 02, 2025
VHPL, the flagship company of the Venkateshwara Hatcheries Group (VH Group), filed an application regarding this matter. VH Group, established in the 1970s, is Asia’s largest fully integrated poultry enterprise. The group is engaged in breeding, hatching, manufacturing poultry vaccines and medicines, and conducting advanced research in poultry sciences. VHPL, incorporated in 1971, is registered under the CGST Act, 2017, and operates across India with multiple GST registrations.
The company entered into agreements with Venkateshwara Research and Breeding Farm Limited (VRBFL) and Venco Research and Breeding Farm Limited (Venco) to provide three categories of services: (i) selling arrangements involving the promotion, marketing, and sale of birds, (ii) veterinary services such as assistance in creating a hygienic environment, providing vaccination, and ensuring proper bird growth, and (iii) laboratory testing and analysis services related to feed, water, and overall poultry health. According to these agreements, VHPL receives consideration in the form of commission and service charges: 10% of the sale value of parent stock for selling arrangements, 3% for veterinary services, and 7% for laboratory testing services.
The primary question before the AAR was whether the commission on selling arrangements could be treated as exempt from GST on the grounds that it pertained to activities associated with live animals, which are generally considered outside the scope of taxable supplies in certain agricultural contexts. However, the AAR clarified that the promotion, marketing, and sale of birds fall squarely within the definition of “supply of services” under Section 7 of the CGST Act, 2017. It further noted that birds cannot be treated as “agricultural produce” as defined under the GST Act, since they are not products that have only undergone processes normally carried out by a cultivator or producer to make them marketable.
As such, the exemption available to commission agents dealing with agricultural produce was held to be inapplicable. Instead, the commission for these services was classified as taxable under Service Accounting Code (SAC) 9961/9997, which attracts GST at the standard rate of 18%.
The bench of D.P. Gojamgunde and Priya Jadhav also rejected the argument that the reverse charge mechanism (RCM) could apply. They clarified that since birds are not agricultural produce, the liability to pay GST on such commission rests with the service provider and not the recipient.
This ruling has significant implications for companies involved in the poultry industry, particularly those providing services related to the promotion, marketing, and sale of birds. It highlights the importance of understanding the specific definitions and exemptions under the GST Act to ensure compliance and avoid penalties. Companies should review their current practices and adjust their accounting and tax strategies accordingly to align with this ruling.
Frequently Asked Questions
What is the Maharashtra Authority for Advance Rulings (AAR)?
The Maharashtra Authority for Advance Rulings (AAR) is a body established under the Goods and Services Tax (GST) Act to provide advance rulings on tax-related issues to taxpayers.
What was the main issue in the AAR ruling for VHPL?
The main issue was whether the 10% commission received for promoting, marketing, and selling birds is exempt from GST. The AAR ruled that it is taxable under GST.
Why is the commission on selling birds not exempt from GST?
The commission is not exempt from GST because the promotion, marketing, and sale of birds are considered 'supply of services' under the CGST Act, 2017, and birds are not classified as 'agricultural produce.'
What is the applicable GST rate for the commission on selling birds?
The applicable GST rate for the commission on selling birds is 18%, as per Service Accounting Code (SAC) 9961/9997.
Does the reverse charge mechanism (RCM) apply to the commission on selling birds?
No, the reverse charge mechanism (RCM) does not apply because birds are not considered agricultural produce. The liability to pay GST rests with the service provider.
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