Service Tax Provision Relating to Agriculture Services

January, 2013

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SERVICE TAX PROVISION RELATINGS TO
AGRICULTURE SERVICES
INTRODUCED FROM : 1
ST
JULY 2012.



COVERED UNDER THE NEGATIVE LIST OF SERVICES
(Section 66D)
Services relating to Agriculture or Agriculture produce by way of-
i. agricultural operations directly related to production of any
agricultural produce including cultivation, harvesting, threshing,
plant protection or seed testing;
ii. supply of farm labor;
iii. processes carried out on 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 the
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;

The services in relation to both agriculture and agriculture produce, are in negative list.

TABLE OF CONTENTS
HEADINGS PAGE NOS.
COVERED UNDER THE NEGATIVE LIST OF SERVICES 1
COVERED UNDER EXEMPTION 2
DEFINITIONS OF CERTAIN TERMS 2
FREQUENTLY ASKED QUESTIONS 3
EXPLANATORY NOTES 3
Service Tax Provision Relating to Agriculture Services
January, 2013

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COVERED UNDER EXEMPTION
( Notification No. 25/12-ST dated 20/06/2012)
Following services in relation to agriculture are exempt:
i. erection or construction of original works pertaining to post harvest storage infrastructure for agricultural
produce including cold storage for such purpose (chilling plants not specifically covered)
ii. erection or construction of original works pertaining to mechanized food grains handling system, machinery or
equipments for units processing agricultural produce as food stuff excluding alcoholic beverages
iii. transportation of agricultural produce and foodstuff including flours, tea, coffee, jaggery, sugar, milk
products, salt and edible oil, excluding alcoholic beverages, chemical fertilizer and oil cakes in a goods
carriage, rail or a vessel
iv. Services provided by GTA for transportation of fruits, vegetables etc. or where amount charged for
transportation is up to a given monetary limit
v. insurance schemes for crops and agriculture
vi. agriculture related production processes/job works
Thus, services relating to agriculture and agricultural produce not covered under the Negative list of services and
under Exempted services are taxable.
DEFINITIONS OF CERTAIN TERMS
1. AGRICULTURE: Clause 3 Section 65B
Agriculture means the cultivation of plants and rearing of all life-forms of animals, except the rearing of
horses, for food, fiber, fuel, raw material or other similar products.

2. AGRICULTURE PRODUCE: Clause 5 Section 65B
Agricultural produce means 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.

3. AGRICULTURAL EXTENSION: Clause 4 Section 65B
Agricultural extension means application of scientific research and knowledge to agricultural practices through
farmer education or training.

4. APMC: Clause 6 Section 65B
Agricultural produce marketing committee or board means 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

5. ORIGINAL WORKS: As defined in Valuation Rules
Original works means:
a) all new constructions or
b) all types of additions and alterations to abandoned or damaged structures on land that are required to
make them workable or
c) erection, commission or installation of plant, machinery or equipment or structures whether
prefabricated or otherwise
Service Tax Provision Relating to Agriculture Services
January, 2013

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FREQUENTLY ASKED QUESTIONS
(Text on Guidance Note on Service Tax issued by CBEC)
i. Would plantation crops like rubber, tea or coffee be also covered under agricultural
produce?(4.4.4)
Yes. Such plantation crops are also covered under agricultural produce.

ii. Would potato chips or tomato ketchup qualify as agricultural produce?(4.4.5)
No. In terms of the definition of agricultural produce, only such processing should be carried out as is
usually done by the cultivator which does not alter its essential characteristics but makes it marketable
for primary market. Potato chips or tomato ketchup are manufactured through processes which alter
the essential characteristic of farm produce (potato and tomatoes in this case).
iii. 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?(4.4.8)
No. Only such processes are covered in the negative list which makes agricultural produce marketable
in the primary market.

iv. Would leasing of vacant land with a green house or a storage shed meant for agricultural produce
be covered in the negative list?(4.4.9)
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.

v. What are the services referred to in the negative list entry pertaining to Agricultural Produce
Marketing Committee or Board?(4.4.11)
Agricultural Produce Marketing Committee 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. APMC's 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
services 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.
EXPLANATORY NOTES
1. Agricultural produce means all produce whether processed or non-processed, manufactured or not, of
agriculture, horticulture, plantation, animal husbandry, forest, sericulture, pisciculture and includes livestock
or poultry as specified in the schedule. [Bihar Agricultural Produce Market Act, 1960, section 2(1)(a) as cited in
Lipton India Ltd., Calcutta v. Bihar State Agrl. Marketing Board, AIR 1998 Pat 58,59]
2. Agricultural Produce means all produce of agriculture, horticulture, animal husbandry, apiculture, pisciculture
or forest as specified in this schedule (M. P. Krishi Upaj Mandi Adhiniyam 197 sec 2(1)(a) as cited in Goyal &
Sons v. Krishi Upaj Mandi Samittee, AIR 1998 MP 202, 204, para II]
3. Forest trees of spontaneous growth cannot be regarded as agricultural or horticultural produce grown on land.
4. There is no service tax liability on erection or installation of machineries or equipments for units processing
agricultural produce as food stuff excluding alcoholic beverages.