EXEMPTION TO SPECIFIED SERVICES DONE ON RICE

[Dr. Sanjiv Agarwal]

Services by way of Loading, Unloading, Packing, Storage or Warehousing of Rice are exempt w.e.f. 17.02.2014 under Entry No. 40 of Service Tax Exemption Notification No. 25/2012-ST dated 20.06.2012 as amended by Notification No. 04/2014-ST, dated 17.02.2014.

Services by way of loading, unloading, packing, storage or warehousing of rice are exempt from levy of Service Tax. Exemption has been granted to 'rice' treating it as agricultural produce vide Notification No. 04/2014-ST, dated 17.02.2014. Thus, storage, warehousing, packing, loading, unloading etc for rice would be exempt from Service Tax. Earlier only paddy was exempt. 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'. Since 'rice' is not an agricultural produce (but '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 notification. The same is clarified vide CBEC Circular No. 177/03/2014-ST, dated 17.02.2014.

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 65B (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. It is not a blanket exemption and shall apply only to following services in relation to rice –

• 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 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	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 dated 17.02.2014
Job work / processing (milling from paddy to rice)	NA	Exempt under Notification No. 25/2012-ST dated 20.06.2012

This exemption is available prospectively and not for the earlier period.