Service tax on C&F Commission

[RAMA KRISHNA KNVS]

Dear Experts

Plz clarify me on the following.

Our company manufactures and sells  Seeds in all states. in every state we have C&F agent to handle the seeds stock. He will handle our stock, raise invoices on our behalf to dealers. for that we pay commission of 4% on net sales. Now i have the following queries.

1. can we consider the seeds as agricultural produce
2. can we avail the benefit of negative list under finance act  - 'Service tax on selling commission payable for selling agricultural produce'  (to escape service tax on commission to C&F Agent)

Ramakrishna

[Vijay Chitte]

Can seeds be termed as fruit, vegetable or food grain or pulse?  Since u are handling that product, I am sure you are in better condition to say Yes or No, I  think seeds cannot come in the definition of agricultural produce.

[YAGAY andSUN]

"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

[RAMA KRISHNA KNVS]

Dear Experts

As far as my understanding is concerned Seeds will come under agricultural produce, because it was produced in the farms by applying normal agricultural procedures on land, may be end use may not be for human consumption. But, i feel it will be covered under definition of agricultural produce.

Ramakrishna

AI Summary

Agricultural produce classification: whether seeds qualify affects applicability of service tax on C&F selling commission. Whether commission paid to C&F agents for sale of seeds is excluded from service tax hinges on whether seeds qualify as agricultural produce under the definition that confines the term to produce of agriculture subject only to minimal customary processing which does not alter essential characteristics; respondent views diverge between excluding seeds from common food categories and treating them as agricultural produce, while the taxpayer asserts seeds meet the definition and thus commission should fall within the negative list exemption.