Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
(Tax Research Unit)
Circular No. 157/8 /2012-ST
153, North Block,
New Delhi, 27th April, 2012
To
Chief Commissioner of Customs and Central Excise / Central Excise & Service
Tax (All)
Director General of Service Tax /Central Excise Intelligence /Audit;
Commissioner of Customs and Central Excise/ Central Excise and Service Tax/
Service Tax (All)
Madam/Sir,
Subject: Services provided by the Agricultural Produce Marketing Committee
(APMC) /Board-- regarding.
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.
- 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.
- 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.
- 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 28.02.2006 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.
- 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.
- 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. Hindi
version to follow.
(Samar Nanda)
Under Secretary, TRU
Tel/Fax: 011-23092037
F.No.354/234/2011-TRU