TaxTMI 
TaxTMI 
NEW EXEMPTIONS IN SERVICE TAX
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....EW EXEMPTIONS IN SERVICE TAX<br>By: - Dr. Sanjiv Agarwal <br>Service Tax<br>Dated:- 26-2-2014<br><br>In Service Tax, exemption has been granted to 'rice' treating it as agricultural produce. Thus, storage, warehousing, packing, loading, unloading etc for rice would be exempt from Service Tax. Earlier only paddy was exempt. Similarly, blood banks would also be exempt treating them as part o....
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....f health care services which were already exempt. Exemption to Rice So far as exemption to 'rice' is concerned, though the Government feels that treating 'rice' differently than 'paddy' is artificial, there is no change in the negative list of services as defined in section 66D of the Finance Act, 1994 or in the definition of 'agricultural produce' in section 65B(....
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....5). While many services in relation to agricultural produce remain in negative list, 'rice' has now only been given exemption from Service Tax on services in relation to loading, unloading, packing, storage or warehousing of 'rice'. This has been done by amending the exemption Notification No. 25/2012-ST dated 20.06.2012. Since 'rice' is not an agricultural produce (but ....
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....9;paddy' is), all benefits of negative list may not be available to 'rice'. However, transportation of rice by rail or vessel or goods transport agency shall be exempt, being covered as 'food stuff'. Milling of paddy into rice shall also be exempt as such milling of paddy is an intermediate production process in relation to agriculture and already covered under exemption notifi....
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....cation. In the pre-2012 era, 'rice' was exempted from Service Tax as it was classified as agricultural produce but as per the definition in section 66B (under negative list), it was so that while paddy was agricultural produce, rice was considered as a processed item and not as an agricultural produce. In Interim Budget speech, Finance Minister addressed this issue and said that "By....
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.... virtue of the definition of 'agricultural produce' in Finance Act 2012, read with the Negative List, storage or warehousing of paddy was excluded from the levy of service tax. Rice was not. The distinction is somewhat artificial. Hence, I propose to exempt loading, unloading, packing, storage and warehousing of rice from service tax." Thus, the Ministry now admits that the discrimination wa....
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....s artificial and as such, it ought to be corrected. However, this correction has been effected by way of an exemption notification and not by way of change in definition itself. It is good that 'rice' has now been exempt from Service Tax but such exemption shall be from specified services only. It is not a blanket exemption and shall apply only to following services in relation to rice - ....
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.... * loading * unloading * packing * storage & * warehousing Comparing the exemptions / taxability in relation to paddy (or agricultural produce) and rice, the following scenario would emerge: Services Paddy (or agricultural produce) Rice Agricultural produce Yes No Agricultural activity Yes Yes Agricultural operations Directly related to produce including, alteration, harvesting....
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.... threshing, testing etc. in negative list No such mention for rice in negative list (rice is not agricultural produce) Supply of labour In negative list [section 66D(d)] Taxable service Agricultural processes If carried out at farm, covered under negative list No such benefit Service provided by APMCs Under negative list [section 66D(d)] No such benefit Transportation in goods carriage....
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.... Exempt under Notification No. 25/2012-ST dated 20.06.2012 Exempt under Notification No. 25/2012-ST dated 20.06.2012 Transportation by rail or vessel Exempt under Notification No. 25/2012-ST dated 20.06.2012 Exempt under Notification No. 25/2012-ST dated 20.06.2012 Loading, unloading, packing, warehousing storage Under negative list [section 66D(d)] Exempt vide Notification No. 4/2014-ST ....
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....dated 17.02.2014 Job work / processing (milling from paddy to rice) NA Exempt under Notification No. 25/2012-ST dated 20.06.2012 Exemption to Health Care Service Health care services by a clinical establishment, authorized medical practitioner or para medics are already exempt from levy of Service Tax. Now cord blood banks have also been added to this category of exemptions. Major changes in....
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.... Service Tax are expected only in the regular Budget in June-July, 2014.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....