Activities like drilling borewells & providing compressors for agriculture not eligible for tax exemption.

The ruling determined that drilling borewells for agricultural purposes and letting out compressors for pumping water to agricultural fields do not qualify as "Support services for agriculture" under SAC 9986. As a result, these activities are not eligible for exemption under SI. No. 54 of Notification 12/2017 CT(Rate).

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Issues Involved:
1. Classification of services related to drilling of borewells for agricultural purposes.
2. Classification of services related to letting out compressors for agricultural purposes.
3. Eligibility for exemption under SI. No. 54 of Notification 12/2017 CT(Rate) dated 28.06.2017.

Detailed Analysis:

Issue 1: Classification of Services Related to Drilling of Borewells for Agricultural Purposes
The applicant, engaged in borewell drilling for various purposes including agriculture, sought clarity on whether such services qualify as "Support services for agriculture" under SAC 9986. They argued that borewell drilling provides essential water for cultivation, thus falling under agricultural operations directly related to raising agricultural produce. However, the ruling clarified that drilling borewells, even in agricultural lands, is classified under SAC 995434, which pertains to water well drilling and septic system installation services. The ruling emphasized that water-well drilling services are specifically covered under SAC 995434 without exceptions, and hence, do not qualify as "Support services for agriculture" under SAC 9986. Consequently, the drilling of borewells is not eligible for exemption under SI. No. 54 of Notification 12/2017 CT(Rate).

Issue 2: Classification of Services Related to Letting Out Compressors for Agricultural Purposes
The applicant also sought clarity on whether letting out compressors for pumping water from borewells to agricultural fields qualifies as "Support services for agriculture" under SAC 9986. The applicant contended that compressors are essential for pumping water needed for cultivation, and thus, should be considered as support services for agriculture. However, the ruling clarified that compressors are general-purpose machinery and not agricultural machinery. Additionally, only the provision of agricultural machinery with crew and operators is considered "Support services for agriculture." Therefore, letting out compressors does not qualify as "Support services for agriculture" under SAC 9986 and is not eligible for exemption under SI. No. 54 of Notification 12/2017 CT(Rate).

Issue 3: Eligibility for Exemption under SI. No. 54 of Notification 12/2017 CT(Rate)
The ruling examined the eligibility for exemption under SI. No. 54 of Notification 12/2017 CT(Rate), which covers services related to the cultivation of plants and rearing of animals for food, fiber, fuel, raw material, or other similar products. The relevant entry under SAC 9986 includes support services to agriculture, hunting, forestry, and fishing. However, the ruling concluded that neither the drilling of borewells nor the letting out of compressors qualifies as support services to crop production under SAC 9986. Consequently, the exemption under SI. No. 54 of Notification 12/2017 CT(Rate) is not applicable to these activities.

Ruling:
1. Drilling of borewells for supply of water in agricultural land is not a "Support Service for agriculture" classifiable under SAC 9986.
2. Letting out of compressors for pumping water from borewells to agricultural fields is not a "Support Service for agriculture" classifiable under SAC 9986.
3. The above two activities are not "Support services for agriculture" classifiable under SAC 9986, and therefore, the exemption at SI. No. 54 of Notification No. 12/2017-C.T.(Rate) is not applicable to these activities.

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