Service tax onTea plantation

[ramkishore gupta]

Dear Sir please guide me weather the following work is exempted or taxable under service tax act:

01. Cutting and removing guatamala for plantating tea

.

02. Levelling lamd befor and after planting

03. Planting tea plants

04. stacking plants for planting tea

05. Mulching after planting tea

will they come under the preview of agriculture in negative list as stated below

[KASTURI SETHI]

These activities fall under horticulture and not agriculture. Hence liable to ST. It does not come under negative list. You can yourself the difference between 'Horticulture' and 'Agriculture' on the internet. There is difference between the two.

[ramkishore gupta]

Thanks sir for the reply

Plz alsl let me know is their any abatement on total amount for calculation of service tax .

[KASTURI SETHI]

No abatement is available.

[ramkishore gupta]

Sir as i read on internet and learned is that horticulture is sub group of agriculture and if agriculuture comes under st exemption is not that horticulture should also be exempted

[KASTURI SETHI]

Yes. Horticulture is part of agriculture but for exemption from ST specific exemption is required which is nowhere mentioned.

[Ganeshan Kalyani]

Happy New Year 2017

I agree with the views of Sri Kasturi Sir. The activity as listed in your query is not included in the exemption notification and in the negative listing as well. Hence in my view too the same is liable to tax. Thanks.

[ramkishore gupta]

Sir as per Section 64 sub section 4.4 for service related to agriculture produce the point 4.4.4 clearly mention plantation crop like rubber, tea or coffee are also covered under agriculture produce.

So dont you think exemption should be available

[KASTURI SETHI]

Sh.Gupta Ji,

Pl. post the relevant extract here.

[ramkishore gupta]

4.4 Services relating to agriculture or agricultural produce.

The services relating to agriculture or agricultural produce that are specified in the negative list are services relating to –32

• agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;

• supply of farm labour;

• processes carried out at the agricultural farm including tending, pruning, cutting, harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but makes it only marketable for the primary market;

• renting of agro machinery or vacant land with or without a structure incidental to its use;

• loading, unloading, packing, storage and warehousing of agricultural produce;

• agricultural extension services;

• services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce;

4.4.1 What is the meaning of ‘agriculture’?

‘Agriculture’ has been defined in the Act as cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not include rearing of horses.

4.4.2 Are activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry included in the definition of agriculture?

Yes. These activities are included in the definition of agriculture.

4.4.3 What is the meaning of agricultural produce?

Agricultural produce has also been defined in section 65B of the Act which means any produce of agriculture on which either no 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. It also includes specified processes in the definition like tending, pruning, grading, sorting etc. which may be carried out at the farm or elsewhere as long as they do not alter the essential characteristics.

4.4.4 Would plantation crops like rubber, tea or coffee be also covered under agricultural produce?

Yes. Such plantation crops are also covered under agricultural produce.

[KASTURI SETHI]

Logically you are right but it is part of an education guide issued by the Board.. It has no statutory force. Pl. read Para No.1.2. Recently a dispute arose on some issue on the basis of clarification given in education guide but Board got rid of the dispute by saying, "Education guide is neither 'Departmental Circular nor a manual of instructions'. The assessee had to face litigation. You may seek guidance from the jurisdictional Range Officer. No officer would give anything in writing. Risk would be yours. The Department allows benefit only when anything specifically mentioned in Negative List or List of Exempted Services.

Why these details have not been made part of Negative List or List of Exempted Services ? Can you answer ?

[Pranay Sahay]

I would agree with you analysis Gupta Ji. 'Agriculture' includes horticulture for service tax purposes too. even if we don't apply the education guide, it is quite clear from the definition of the term Agriculture in the Finance Act [Section 65B(3)] which reads:

"agriculture" means the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products."

It is clear from the above that CULTIVATION OF PLANT FOR RAW MATERIAL OR ANY SUCH PRODUCTS would be covered under the definition of Agriculture. hope it helps.

[ramkishore gupta]

More experts comment regarding the matter please

[KASTURI SETHI]

The word, 'Horticulture' must find mention in either negative list or exemption notification to claim exemption from Service Tax notwithstanding horticulture is wing of agriculture. Difference between the two is visible. Non-mention of horticulture specifically in the negative list or list of exempted services will invite litigation. Better option is to get clarification from the jurisdictional Range Officer/A.C./DC in-charge Division, if no response make representation to the Board to sort out the problem once for all and for all concerned.

[DEV KUMAR KOTHARI]

With due regard for views expressed by learned people in response to above query, I would say that in case of a tea Estate (with or without tea factory) all activities which are aimed to produce green teal leaves are agricultural activities and not horticultural activities. This is for reasons that:

a. all these acrtivities are for the purpsoe of cultivation of green tea leaves which are processed to make tea of different verities, grades and qualities.

b. tea is an item of daily diet for people who are used to drink tea in different manner.

c. activity is in large scale and is not small scale and is not as hobby or part time activity.

d. These activities are carried directly on agricultural land and not in artificial setting.

e. as per cases under Income-tax Act income from these activities is covered under agricultural income.

f. Tea plants cultivated are mainly used in Tea Estate for infilling, replanting or extension plantation.

g. some small farmers also grow plants and sell to other Tea Estates. The also cultivate plants directly on agricultural land and not in artificial setting.

Therefore, all activities mentioned in query, when carried out in a tea plantation are agricultural activities.

Besides, as per dictionaries horticultural is one type of agriculture, and unless it is specifically excluded , it will be agricultural activity.

Let us undertake more brain storming.

Dev Kumar Kothari

[KASTURI SETHI]

Sh.Dev Kumar Kothari Ji,

Sir, First of all thanks for your valuable inputs on the issue. I agree with you in toto. I have expressed my views from department's perspective. We have seen so many issues which can be termed as 'lame issues' but these are settled in the Supreme Court. The Department fights legally up to the end. You also know the percentage of cases decided in favour of the Department. The assessee should either get clarification in writing from the department, or it is not litigation-free. This is my view.

Thanks & regards

K.L.SETHI

AI Summary

Agricultural exemption: tea plantation activities may fall within agriculture but require explicit listing or written administrative clarification. Preparatory and planting activities in tea estates-clearing, levelling, planting, stacking and mulching-are argued to be covered by the statutory definition of agriculture (which includes horticulture and plantation crops) and hence potentially exempt; however, Board education guides confirming this are non binding, and exemption will practically depend on explicit inclusion in the negative list or formal exemption notifications or on obtaining written administrative clarification.