Gujarat AAR Holds Semen Sorting Services Exempt from GST and Classifiable Under SAC 9986 as Animal Husbandry Support Services

Background and Issues
The applicant, Jiva Sciences Pvt. Ltd., is engaged in the business of separating X and Y chromosome-bearing sperm cells from bovine semen using proprietary technology. The processed semen is returned to Semen Stations, which then package and distribute the final semen doses for artificial insemination of cattle. While semen doses are exempt from GST, the applicant sought clarity on the GST treatment and classification of ‘Semen Sorting Services.’ Specifically, the applicant requested a ruling on whether these services are exempt, whether they fall under SAC 9986, and, if not, the appropriate HSN/SAC code.

Applicant and Department Submissions
The applicant argued that semen sorting services are an intermediate step in animal rearing and should be classified under SAC 9986 (support services to agriculture and animal husbandry) or SAC 998612 (animal husbandry services). The Department, however, contended that the activity is a specialized, technology-driven process not covered by SAC 9986 or 9988 (job work), and should instead be classified under SAC 998399 as ‘Other professional, technical and business services.’ The Department emphasized that the dominant element of the supply is the application of specialized scientific expertise, not routine agricultural support.

Court’s Analysis and Reasoning
The AAR examined the process and noted that the applicant’s services are a specialized component of artificial insemination, which is itself classified under animal husbandry services (SAC 998612) and falls within the broader heading of SAC 9986. The AAR agreed with the applicant that semen sorting is an intermediate process supporting the rearing of animals, as it directly facilitates livestock breeding for essential resources like milk and meat.

The AAR also addressed the Department’s argument regarding job work. It held that the definition of ‘job work’ under Section 2(68) of the CGST Act does not restrict the scope to manual or labour-intensive tasks; specialized technical procedures also qualify. Since the applicant processes semen belonging to Semen Stations and returns the sorted product, the activity meets the definition of job work.

Further, the AAR referred to Notification No. 11/2017-Central Tax (Rate), Entry No. 24, which exempts intermediate production processes such as job work related to the rearing of animals under SAC 9986. The AAR also cited Notification No. 12/2017-CT(R) and Notification No. 2/2017-CT(R), which exempt services by way of artificial insemination and bovine semen, respectively, reinforcing the legislative intent to exempt activities related to artificial insemination.

On the issue of classification, the AAR rejected the Department’s reliance on the residual SAC 998399, noting that the GST classification scheme requires the most specific description to be preferred over a general or residual entry. Since SAC 9986 specifically covers support services to animal husbandry, it takes precedence.

Ruling and Conclusion
The Gujarat AAR ruled that semen sorting services are exempt from GST as they are support services to animal husbandry and constitute an intermediate process in the rearing of animals. The services are to be classified under SAC 9986. The question of alternative classification does not arise in view of this finding.

This decision provides clarity for service providers in the animal husbandry sector, confirming that specialized technical processes integral to livestock breeding are eligible for GST exemption when they fall within the ambit of support services under SAC 9986.