Service tax is payable by Tea industries

[Guest]

Dear Sir,

Let us know the applicability of Service tax on tea industries as it is agriculture base industries. '' Kindly advice the following services are taxable in normal case and Reverse charge mechanisim.

a) Service tax on freight outward for tea product.

b) Service tax on freight inwards for store & Spares parts and any capital goods and other consumable items.

c) Service tax on legal , consultancy on tea industries.

d) Service tax on Security service and manpower service on tea industries.

e) Service tax on work contract on tea industries.

f) Service tax on car hire charges on tea industries.

Regards

Sanjoy Das

'

[Rajagopalan Ranganathan]

Sir,

According to Section 65 B (5) of Finance Act, 1994 "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.

Therefore in my opinion tea is not an agricultural produce according to above definition since tea leaves plucked from the plant are under going various process before it is rendered as marketable. Hence tea cannot be treated as agricultural produce. Therefore you are liable to pay service tax on all the service availed by you either through the service provider or under reverse charge mechanism.

AI Summary

Taxability of services to tea industry: services are taxable since tea is not treated as agricultural produce. Tea, having undergone processing that alters its essential characteristics, does not qualify as agricultural produce under the statutory definition; accordingly services supplied to tea industries-including freight (outward and inward), legal and consultancy, security and manpower, work contracts, and car hire-are taxable, whether charged by the service provider or under the reverse charge mechanism.