RCM on Goods, Entries 1 to 4A: Where the Agriculturist Definition Does the Work

RCM on Goods explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Notification No. 4/2017-Central Tax (Rate) is the goods counterpart of the services reverse charge notification. Its first five entries are agricultural, and four of them turn entirely on one definition — who counts as an agriculturist.

Entries 1, 2, 3 and 4A of Notification No. 4/2017-CT(Rate) cover cashew nuts (not shelled or peeled, 0801), bidi wrapper leaves — tendu (1404 90 10), tobacco leaves (2401) and raw cotton (5201) supplied by an agriculturist to any registered person. Entry 3A covers specified essential oils other than those of citrus fruit — the mentha family — supplied by any unregistered person to any registered person. Entry 4 covers silk yarn (5004 to 5006) supplied by a person who manufactures silk yarn from raw silk or silkworm cocoons. Section 2(7) defines "agriculturist" by reference to who does the cultivation work, not who owns the land.

The definition that decides four entries

Section 2(7): an "agriculturist" means an individual or a Hindu Undivided Family who undertakes cultivation of land —

(a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind, or by hired labour under personal supervision or the personal supervision of any member of the family.

Section 2(49) then defines "family" as (i) the spouse and children of the person, and (ii) the parents, grandparents, brothers and sisters of the person if they are wholly or mainly dependent on him.

Three features of this definition control the entries:

First, only an individual or an HUF can be an agriculturist. A company, a firm, an LLP, a co-operative society or a trust cultivating land is not an agriculturist, however agricultural its activity. A supply of raw cotton by a farming company to a registered mill is therefore not within entry 4A, and the ordinary forward charge applies.

Second, land ownership is irrelevant. The Handbook is explicit: "An individual or HUF undertaking cultivation of land, whether own or not, would be regarded as an agriculturist." A tenant farmer, a sharecropper and a lessee all qualify.

Third, hired labour is permitted but supervised. Limb (c) allows servants on wages or hired labour — but only under the personal supervision of the individual or a family member. A cultivation operation run entirely through a contractor, with no personal supervision, sits outside the definition.

Entries 1, 2 and 3: cashew nuts, tendu leaves and tobacco leaves

Read the descriptions narrowly. Entry 1 covers cashew nuts not shelled or peeled — the raw nut as it leaves the farm. Once processed, the goods are different goods and the entry does not follow them. Entry 2 is confined to the specific tariff item for tendu leaves.

The recipient limb is simply "any registered person" — no threshold, no category, no business-entity test. A registered processor buying tobacco leaves from a farmer pays.

Entry 3A: mentha and the essential oils

This entry is different in kind. Its supplier column is "any unregistered person", not "agriculturist" — so it operates as a targeted anti-leakage measure rather than an agricultural entry.

Current text, w.e.f. 01.01.2023 (tariff items 3301 24 00, 3301 25 10, 3301 25 20, 3301 25 30, 3301 25 40, 3301 25 90) — the following essential oils other than those of citrus fruit:

(a) of peppermint (Mentha piperita); (b) of other mints: spearmint oil (ex-mentha spicata), water mint-oil (ex-mentha aquatic), horsemint oil (ex-mentha sylvestries), bergament oil (ex-mentha citrate), and Mentha arvensis.

Its history explains its shape. The entry was inserted by Notification No. 10/2021-CT(Rate) dated 30.09.2021 w.e.f. 01.10.2021, on the GST Council's recommendation at its 45th meeting (17.09.2021), as "a measure to improve compliance and curb irregular refunds on exports". It was then substituted by Notification No. 14/2022-CT(Rate) dated 30.12.2022 w.e.f. 01.01.2023, following the 48th Council meeting (17.12.2022), to bring Mentha arvensis within the entry as had been done for mentha oil.

The point of the entry is the export refund chain, not agriculture — which is why it catches supply from any unregistered person, not only from an agriculturist.

Entry 4: silk yarn

The supplier column is a description of activity, not of status. It does not matter whether the reeler is an individual, an HUF, a firm or a company; what matters is that the person manufactures silk yarn from raw silk or silkworm cocoons. A trader buying and reselling silk yarn is outside entry 4.

Entry 4A: raw cotton, and the reasoning behind it

Inserted by Notification No. 43/2017-CT(Rate) dated 14.11.2017, w.e.f. 15.11.2017.

The Handbook records the policy reasoning, which is worth understanding because it explains why an input at the farm gate was singled out. Raw cotton, cotton (rut), cotton yarn and cotton seeds all attract 5%, while cotton oil cake was exempted w.e.f. 22.09.2017. Before 13.10.2017, a registered dealer buying raw cotton from an agriculturist paid under the old section 9(4); that provision was then kept in abeyance. The result was a distortion: composite units procuring cotton from farmers suffered no tax, while standalone oil millers buying cotton seeds bore GST and, with about 25% oil content, had to reverse credit attributable to the exempt cake — raising the cost of cotton seed oil cake by roughly ₹82 per quintal against composite mills. Entry 4A restored parity.

Two clarifications sit on this entry.

The TRU FAQ (F. No. 332/2/2017-TRU, December 2017) answered the ginning trade's question directly: where raw cotton is supplied by an agriculturist to a registered person — a manufacturer or dealer — that registered person pays under reverse charge. In other cases, GST is paid by the supplier.

Circular No. 200/12/2023-GST dated 01.08.2023, following the 50th Council meeting (11.07.2023), clarified that supply of raw cotton, including kala cotton, from agriculturists to co-operatives is a taxable supply, and attracts 5% under reverse charge in the co-operative's hands under Notification No. 43/2017-CT(Rate). In view of prevailing genuine doubts, the past periods were regularised on an "as is" basis.

The APMC agent problem

The Handbook flags a live enforcement issue that arises around entry 4A and is worth recording, because demands are being raised on it.

Agricultural Produce Market Committee (APMC) agents have been made liable to RCM on raw cotton trades because they pay a deposit to growers before the onward sale. But the Handbook's point is that the type of licence the agent holds is being lost sight of when demands are framed. APMC agents hold either a kuchha (non-reselling agent) or a pucca (reselling agent) licence, and the two produce different consequences:

• an agent is liable to GST on commission at 18%; or
• on deemed supplies under paragraph 3 of Schedule I,

and which of the two applies is tied to the licence type. The Handbook observes that agents are often unaware of the alternatives, and that in sectors without an oversight body comparable to the APMC, "RCM demands are more rigorous." It also notes that for income-tax purposes such agents typically report only commission as gross revenue — a mismatch that invites scrutiny.

Key takeaways

• Section 2(7) confines "agriculturist" to an individual or HUF; a company, firm or society cultivating land is not one.
• Ownership of the land is irrelevant; hired labour is permitted only under personal supervision.
• Entries 1, 2, 3 and 4A — cashew nuts (unshelled/unpeeled), tendu leaves, tobacco leaves, raw cotton — supplied by an agriculturist to any registered person.
• Entry 3A is not an agricultural entry: it catches specified mentha-family essential oils from any unregistered person, to curb irregular export refunds.
• Entry 4 turns on the activity of manufacturing silk yarn from raw silk or cocoons, not the supplier's constitution.
• Circular No. 200/12/2023-GST confirms raw cotton from agriculturists to co-operatives attracts 5% RCM, with the past regularised "as is".
• APMC agent demands must be tested against the kuchha or pucca licence — commission at 18%, or a deemed supply under paragraph 3 of Schedule I.

Read next

• RCM Goods Entries 5 to 7: Lottery, Government Scrap and PSLC
• Metal Scrap Under Reverse Charge: Entry 8 and the Three Notifications of October 2024
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route

Disclaimer: Positions stated as on 5 September 2026, based on entries 1, 2, 3, 3A, 4 and 4A of Notification No. 4/2017-Central Tax (Rate) as amended by Notification Nos. 43/2017, 10/2021 and 14/2022-Central Tax (Rate), sections 2(7) and 2(49) of the CGST Act, 2017, the TRU FAQ F. No. 332/2/2017-TRU and Circular No. 200/12/2023-GST, as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).