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Circ No 157 8 ST PDF

The document discusses services provided by Agricultural Produce Marketing Committees (APMCs) in India and whether service tax applies to fees collected by APMCs. It summarizes that: 1) APMCs are statutory bodies that regulate agricultural markets and charge license fees from wholesale traders to fund facilities like roads, storage, and utilities in market areas. 2) These facilities benefit all market users and are not provided specifically to licensees, so the services do not qualify as "business support services" and the fees are not consideration for outsourced services. 3) As the services provided by APMCs using license fees facilitate farmers and purchasers, they are classified as "business auxiliary services

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46 views2 pages

Circ No 157 8 ST PDF

The document discusses services provided by Agricultural Produce Marketing Committees (APMCs) in India and whether service tax applies to fees collected by APMCs. It summarizes that: 1) APMCs are statutory bodies that regulate agricultural markets and charge license fees from wholesale traders to fund facilities like roads, storage, and utilities in market areas. 2) These facilities benefit all market users and are not provided specifically to licensees, so the services do not qualify as "business support services" and the fees are not consideration for outsourced services. 3) As the services provided by APMCs using license fees facilitate farmers and purchasers, they are classified as "business auxiliary services

Uploaded by

Bhan Wati
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SECTION 65(19) OF THE FINANCE ACT, 1994 - BUSINESS AUXILIARY

SERVICES - EXEMPTION TO SERVICES PROVIDED BY THE


AGRICULTURAL PRODUCE MARKETING COMMITTEE (APMC) /BOARD

CIRCULAR NO. 157/8 /2012-ST, DATED 27-4-2012

Representations have been received, seeking clarification regarding the levy of service
tax on certain services provided by the Agricultural Produce Marketing Committee
(APMC)/Board, using the 'market fee', in the light of Notification No.14/2004-ST. The
representations have been examined.

2. APMCs are statutory bodies created with a view to regulate agricultural produce
markets. APMCs charge market fee for issuing licenses to whole sale trader-cum-
commission agent, wholesale traders, commission agent, mill / factory / cold storage
owners or any other buyers of agricultural produce, for an agricultural year. The amount
so collected by the APMC, from the licensees, is used for providing among other things
facilities like roads, drinking water, weighing machines, storage places, street lights, etc.
in the market area. These services are not provided on one-to-one basis i.e. in
consideration or as an obligation to the persons who have tendered the license fee. Some
of these services may be capable of being used more conspicuously by the licensees but
they do not form part of any contractual obligation to any of the licensees.

3. Reportedly some field formations are inclined to take a view that services provided by
the APMCs are in the nature of Business Support Service (BSS), and hence the
exemption made available for BAS in relation to agriculture vide Notification
No.14/2004-ST will not be applicable. As a consequence, service tax becomes leviable
on the 'market fee' popularly known as 'mandi shulk', collected by the APMC.

4. When examined with reference to its constitution and functions, the services provided
by APMC out of the 'market fee' collected from the licensees, do not appropriately fall
under the category of BSS. The distinction between BSS and BAS is explained in the
instructions dated 28-2-2006 issued from F.No.334/4/2006-TRU. In the light of the above
instruction, the service provided by APMC out of the market fee is not in the nature of
'outsourced service'. It is not possible to hold that the licensees have outsourced the
development and maintenance of agricultural market to the APMC, which could have
been otherwise undertaken by them, solely in their business interest. Development and
maintenance of agricultural market infrastructure undertaken by APMC in accordance
with the statute, is for the benefit of all users, rather than an activity solely in the interest
of licensees. Hence, APMC cannot be said to be rendering 'business support service' to
the licensees. 'Market fee' is not in the nature of consideration for such BSS.

5. As statutory bodies, APMCs provide basic facilities in the market area out of the
'market fee' collected from the licensees, mainly to facilitate the farmers, purchasers and
others. APMCs provide a host of services to the licensees in relation to the procurement
of agricultural produce, which are 'inputs' in terms of the definition given in section
65(19) of the Finance Act, 1994 itself. To that extent the meaning of 'input' is much wider
in scope than the meaning assigned in rule 2(k) of Cenvat Credit Rules, 2004. Therefore,
it is clarified that the services provided by the APMC are classifiable as BAS and hence
covered by the exemption under Notification 14/2004-ST.

6. However, any other service provided by the APMCs for a separate charge(other than
'market fee') to either the licensees or farmers or any other person, e.g. renting of shops in
the market area, etc. would be liable to tax under the respective taxable heads. This
Circular may be communicated to the field formations and service tax assessees, through
Public Notice/Trade Notice.

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