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Services Relating to Agriculture
Services Relating to Agriculture

Negative List Page

INTRODUCED: With Effect From 1st July 2012
 
Contents
Definition
Exemption
Clarification
Relevant Service Tax Notification
Relevant Service Tax Circulars
 
 
DEFINITION:

Section 65B (3) states that "agriculture" means the 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;

Section 65B (4) defines "agricultural extension" to mean application of scientific research and knowledge to agricultural practices through farmer education or training

Section 65B (5) defines "agricultural produce" as any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;

Section 65B (6) defines the term "Agricultural Produce Marketing Committee or Board" as any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce;

Negative List Entry;

As per Section 66D (d) Services relating to agriculture or agricultural produce by way of the following are non-taxable negative list services -

(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 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;

EXEMPTION
 

The Notification No. 25/2012-ST dated 20.06.2012 as amended by Notification No 04/2014-ST dated 17.02.2014 provides exemption to the following services :-

(a) Services by a veterinary clinic in relation to health care of animals or birds.

(b) Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance,  renovation or alteration of  canal, dam or other irrigation works.

(c) Services by way of construction, erection, commissioning or installation of original works pertaining to post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes or mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.

(d) Services by way of transportation by rail or a vessel from one place in India to another of agricultural produce,  foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages.

(e) Services provided by a goods transport agency by way of transportation of fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage.

(f) Services of general insurance provided for cattle insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme); Agricultural Pumpset and Failed Well Insurance, Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture; National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); Pilot Scheme on Seed Crop Insurance; Central Sector Scheme on Cattle Insurance; Coconut Palm Insurance Scheme.

(g) Services of an authorised person to a member of a commodity exchange.

(h) Carrying out an intermediate production process as job work in relation to agriculture.

(i) Services by way of slaughtering of animals.

(j) Services by way of loading, unloading, packing, storage or warehousing of rice

 
CLARIFICATION
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Are activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry included in the definition of agriculture?

Yes. These activities are included in the definition of agriculture.

Would plantation crops like rubber, tea or coffee be also covered under agricultural produce?

Yes. Such plantation crops are also covered under agricultural produce.

Would potato chips or tomato ketchup qualify as agricultural produce?

No. In terms of the definition of agricultural produce, only such processing should be carried out as is usually done by cultivator producers which does not alter its essential characteristics but makes it marketable for primary market. Potato chips of tomato ketchup are manufactured through processes which alter the essential characteristic of farm produce (potatoes and tomatoes in this case).

Would operations like shelling of paddy or cleaning of wheat carried out outside the farm be covered in the negative list entry relating to agriculture as sub-clause (iii) of clause (d) of section 66D relating to services by way of processes carried out at an agricultural farm?

The said sub-clause (iii) also includes ‘such like operations which do not alter the essential characteristic of agricultural produce’. Therefore, activities like the processes carried out in agricultural farm would also be covered if the same are performed outside the agricultural farm provided such processes do not alter the essential characteristics of agricultural produce but only make it marketable in the primary market. Therefore, cleaning of wheat would be covered in the negative list entry even if the same is done outside the farm. Shelling of paddy would not be covered in the negative list entry relating to agriculture as this process is never done on a farm but in a rice sheller normally located away from the farm.

However, if shelling is done by way of a service i.e. on job work then the same would be covered under the exemption relating to ‘carrying out of intermediate production process as job work in relation to agriculture’.

Would agricultural products like cereals, pulses, copra and jaggery be covered in the ambit of ‘agricultural produce’ since on these products certain amount of processing is done by a person other than a cultivator or producer?

‘Agricultural produce’ has been defined in clause (5) of section 65B as ‘any produce resulting from cultivation or rearing of plants, animals including all life- forms, on which either no further processing is done or such processing is done as is usually done by the cultivator or producer which does not alter essential characteristics of agricultural produce but make it marketable for primary market’. The processes contemplated in the said definition are those as are ‘usually done by the cultivator or producer’.

Would the processes of grinding, sterilizing, extraction packaging in retail packs of agricultural products, which make the agricultural products marketable in retail market, be covered in the negative list?

No. Only such processes are covered in the negative list which makes agricultural produce marketable in the primary market.

Would leasing of vacant land with a green house 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 green house built on it which is incidental to its use for agriculture then its lease would be covered under the negative list entry.

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, license 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.

 
RELEVANT SERVICE TAX NOTIFICATIONS:
 

     Notification No 25/2012 dated 20.06.2012 - Exemption Notification

     Notification No 44/2012 dated 07.08.2012 - Exemption Notification

     Notification No 04/2014 dated 17.02.2014 - Exemption Notification

 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
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 Taxation of Services - An Education Guide dated 20.06.2012

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