Government of India
Department of Revenue
Central Board of Excise & Customs
New Delhi
Circular No. 189/8/2015-Service Tax
New Delhi, the 26th November, 2015
To
Principal Chief Commissioners of Customs and Central Excise(All)
Principal Chief Commissioners of Central Excise & Service Tax (All)
Principal Director Generals of Goods and Service Tax/System/CEI
Director General of Audit/Tax Payer Services,
Principal Commissioners/ Commissioners of Customs and Central Excise (All)
Principal Commissioners/Commissioners of Central Excise and Service Tax (All)
Principal Commissioners/Commissioners of Service Tax (All)
Principal Commissioners/Commissioners LTU/Central excise/Service Tax (Audit)
Madam/Sir,
Sub: Clarification regarding leviability of service tax in respect of Seed
Testing with effect from 01.07.2012-reg.
It has come to the notice of the Board that certain field formations have taken
a view that all activities incidental to seed testing are leviable to service
tax and only the activity in so far it relates to actual testing has been
exempted in the Negative List.
- The matter has been examined. In this regard, Negative list entry under
Clause (d) of section 66D of the Finance Act, 1994 is reproduced as under :
(d) services relating to agriculture or agricultural produce by way of
(i) agricultural operations directly related to production of any agricultural
produce including cultivation, harvesting, threshing, plant protection or
testing;
2.1 Term agriculture has been defined under section 65B clause (3) as under:-
(3) 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;
2.2 Term agriculture produce has been defined under section 65B clause (5) as
under:-
(5) 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;
2.3 There is no doubt that seed is not covered under the definition of
agriculture produce. All services relating to agriculture by way of agriculture
operations directly relating to production of agriculture produce including
testing is covered. Testing and certification can be done as per the Act and
rules made there under in this regard. Testing cannot stand in isolation of
certification and other ancillary activities. Testing cannot be random, somebody
has to register for testing. If certificate is not received and seeds are not
tagged, testing is irrelevant. Therefore, all processes are a part of the
composite process and cannot be separated from testing.
2.4 Agricultural operations have not been defined in the Chapter V of the
Finance Act, 1994 and an inclusive and indicative list of such operations has
been given. Thus it has been defined as Agricultural operations directly related
to production of any agricultural produce including cultivation, harvesting,
threshing, plant protection or testing. The exemption is thus not limited to the
specified operations. The word seed from testing in agricultural operations was
deleted so as to broaden the scope of coverage of the negative list entry and to
cover any testing in agricultural operations in negative list, which are
directly linked to production of agriculture produce and not to limit its scope
only to seeds.
- 3.0 It may be recalled that prior to introduction of Negative List, the services
[technical testing and analysis and technical inspection and certification of
seeds], rendered by notified Central/ State Seed Testing Laboratories /Agency
were exempt from Service Tax [notification No.10/2010-Service Tax]. This
notification was rescinded by another notification [No.34/3012-Service Tax,
dated 20-06-2012], w.e.f. 01-07-2012, when the Negative List entry came into
force. The intent of rescinding the said notification was not to withdraw the
above stated exemption but the said exemption was being subsumed elsewhere. The
relevant entry in the Negative list as on 01.07.2012 read as under:-
(d) services relating to agriculture or agricultural produce by way of
(i) agricultural operations directly
related to production of any agricultural
produce including cultivation, harvesting, threshing, plant protection or
seed
testing;
3.1 Further, in the subsequent Budget 2013-14, the word seed prefixed to seed
testing was omitted w.e.f. 10.05.2013. The intent was clarified by the Joint
Secretary (Tax Research Unit) vide Budget D.O.F. No. 334/3/2013-TRU, New Delhi,
dated February 28, 2012, in para 1 (iii) of the letter that the negative list
entry in sub-clause (i) of clause (d) of section 66D is being modified by
deleting the word seed. This will allow the benefit to all other testing in
relation to agriculture or agricultural produce.
- In view of the above, it is clarified that all testing and ancillary
activities to testing such as seed certification, technical inspection,
technical testing, analysis, tagging of seeds, rendered during testing of seeds,
are covered within the meaning of testing as mentioned in sub-clause (i) of
clause (d) of section 66D of the Finance Act, 1994. Therefore, such services are
not liable to Service Tax under section 66B of the Finance Act, 1994.
All concerned are requested to acknowledge the receipt of this circular.
Difficulty if any, in the implementation of the circular should be brought to
the notice of the Board. Hindi version would follow.
Yours faithfully,
(Ravindra Kumar)
Technical Officer (TRU)
F. No. 354/279/2015-TRU
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