Borewell drilling & compressor rental not exempt under agriculture support services.

The drilling of borewells for supplying water for agricultural operations and letting out compressors for pumping water to agricultural fields were found not to qualify as "Support services for agriculture" under SAC 9986. The activities were classified differently and were not eligible for exemption under Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. The Authority ruled that these services did not meet the criteria for exemption related to cultivation, farm labor, or agricultural machinery as outlined in the notification.

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Issues Involved:
1. Whether drilling of borewells for supply of water for agricultural operations is a service directly related to agricultural operations.
2. Whether letting out of compressors for pumping water from borewells to agricultural fields is a service directly related to agricultural operations.
3. Whether the services mentioned above are covered by entry Sl.No. 54 of Notification 12/2017 CT (Rate) dated 28.06.2017.

Detailed Analysis:

Issue 1: Drilling of Borewells for Agricultural Operations
The applicant provides drilling of borewell services mainly to agriculturists for raising agricultural crops. They argue that water is essential for cultivation, and the borewells drilled provide the required water for agricultural activities, thus classifying it under SAC 9986 as "Support services for agriculture." However, the Authority concluded that drilling of borewells is a construction service involving water well drilling, specifically classified under SAC 995434, which includes all water-well drilling services without exceptions. Therefore, it does not qualify as a "Support service for agriculture" under SAC 9986 and is not eligible for exemption under Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.

Issue 2: Letting Out of Compressors for Agricultural Operations
The applicant lets out compressors to agriculturists to pump water from borewells. They argue that compressors are essential for pumping water, which is crucial for cultivation, thereby classifying it under SAC 9986 as "Support services for agriculture." However, the Authority found that compressors are general-purpose machinery and not agricultural machinery. Only the provision of agricultural machinery with crew and operators is considered a "Support service for agriculture." Therefore, letting out compressors does not qualify as a "Support service for agriculture" under SAC 9986 and is not eligible for exemption under Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.

Issue 3: Applicability of Entry Sl.No. 54 of Notification 12/2017 CT (Rate)
The Authority examined the eligibility of the applicant's activities for exemption under entry Sl.No. 54 of Notification No. 12/2017-C.T.(Rate). The relevant entry exempts services relating to the cultivation of plants and rearing of animals for food, fiber, fuel, raw material, or other similar products. This includes agricultural operations directly related to production, supply of farm labor, processes carried out at an agricultural farm, renting or leasing of agro machinery, and other related services. The Authority concluded that neither the drilling of borewells nor the letting out of compressors qualifies as support services for agriculture under SAC 9986. Therefore, the exemption at Sl.No. 54 of Notification No. 12/2017-C.T.(Rate) is not applicable to these activities.

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

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