Service Tax - BAS - Processing of Agricultural Produce - CBEC Clarification
AS per Notification No. 14/2004-ST dated 10.09.2004,
Taxable service provided to a client by any person in relation to the business auxiliary service , in so far as it relates to,-
++ procurement of goods or services, which are inputs for the client;
++ production or processing of goods for, or on behalf of, the client;
++ provision of service on behalf of the client; or
++ a service incidental or auxiliary to any activity specified in (a) to (c) above,
and provided in relation to agriculture , printing, textile processing or education, from the whole of service tax leviable thereon under section 66 of the said Finance Act:
is exempted.
Board has received a representation that field formations are not considering processing of tobacco involving threshing and drying of tobacco leaves and client processing of raw cashew involving roasting/drying, shelling and peeling of raw cashew, as in relation to agriculture.
Now the Board clarifies:-
Client processing which falls under business auxiliary service undertaken on the primary agricultural produce namely tobacco or raw cashew, does not result in any change in their essential character of tobacco or cashew.
In the light of the above principle
(i) process of threshing and drying of tobacco leaves and thereafter packing the same and
(ii) processing of raw cashew and recovering kernel ,
undertaken for, or on behalf of, the clients by processing units are covered by the expression “... processing of goods for, or on behalf of, the client.....and provided in relation to agriculture,...” appearing in the said notification.
Board further clarifies that:-
where the commission agents stationed abroad provide business auxiliary service to promote the export of rice, said business auxiliary service is covered by notification 13/2003-ST(as amended) because, the word ‘rice' is mentioned under the explanation to the term ‘agricultural produce', in the inclusive portion along with other items like cereals, pulses, etc.
Notification No. 13/2003-Service Tax exempts,
the business auxiliary services provided by a commission agent in relation to sale or purchase of agricultural produce from the service tax leviable thereon under section 66 of the said Act.
Explanation .
(ii) “agricultural produce” means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice , coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco.”
CBEC Circular No. 143/12/2011 - ST., Dated: May 26, 2011