Case Law Details
Case Name : In re Tvl. Vallalar Borewells (GST AAAR Tamilnadu)
Related Assessment Year :
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In re Tvl. Vallalar Borewells (GST AAAR Tamilnadu)
Essentially, the moot point is whether the bore well drilling activity undertaken by the appellant on agricultural lands is qualified for the entry no. 54 of notfn. No. 12/2017-CGST(R). It is noted that the appellant while undertaking the borewell drilling activity for industries etc., (other than on agricultural lands), it is classified under SAC 995434 leviable to appropriate rate of GST. However, while undertaking the same activity on agricultural lands, the appellant seeks whether the same would fall under SAC 9986 so as to be eligible to ...
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what is the gst rates for tubewell services provides to farmers is that expemted or 18% with 995434
GST Burden Analysis on Borewell Drilling Sector
Representation to Authorities for GST Reduction/Exemption
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Slide 1 – Introduction
Borewell drilling services are vital for agriculture, drinking water supply, and industry.
Current GST rate: 18% creates a disproportionate tax burden compared to actual Input Tax Credit (ITC).
This document seeks to present sector importance, cost analysis, and a request for relief.
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Slide 2 – Importance of Borewells in India
1. Backbone of Rural Water Supply – Primary source of drinking water in many villages, ensuring year-round availability.
2. Critical for Agriculture – Over 60% of irrigation in India relies on groundwater accessed through borewells.
3. Drought Resilience – Acts as a lifeline in drought-prone states like Maharashtra, Rajasthan, Telangana, and Karnataka.
4. Support for Food Security – Stable irrigation keeps crop yields consistent, helping control food prices.
5. Enabler of Modern Farming – Supports drip & sprinkler irrigation, precision farming, and multiple cropping cycles.
6. Industrial & Community Uses – Water supply for small industries, construction, schools, and rural health centers.
7. Employment Impact – Generates direct and indirect jobs in drilling, machinery, transport, and maintenance.
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Slide 3 – Why Borewells are Important in Agriculture
1. Year-round irrigation reduces dependence on monsoon.
2. Higher yields & multiple crops per year.
3. Stable income for farmers, reducing rural migration.
4. Protection from climate-related crop losses.
5. Enables modern irrigation technology.
6. Only viable water source in rainfed & drought-prone regions.
7. Strong link to national food security and agro-based industries.
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Slide 4 – Cost Structure & GST ITC Eligibility
Cost Component % of Total Cost GST ITC Eligibility Remarks
Casing Pipe 25–30% Yes Main GST input
Spare Parts ~5% Yes (partial) For truck & compressor maintenance
Drilling Machine & Truck 0.2–0.5% Yes Minimal yearly share due to 10+ year lifespan
Diesel 45–60% No Major non-creditable expense
Labour ~5% No Salaries/wages exempt
Repairs (Non-GST) ~3% No From unregistered vendors
Staff Ration & Site Mgmt ~2% No Field running costs
Other Field Expenses ~2% No Site permits, transport, etc.
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Slide 5 – ITC vs Output Tax Analysis
Total ITC availability: ~35.5% of total cost.
Non-GST-covered costs: ~64.5% of total cost.
GST Liability: 18% on total invoice value.
Majority of GST is paid from own pocket rather than via ITC.
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Slide 6 – Sector Challenges
1. ITC and GST mismatch creates working capital pressure.
2. Low profit margins (8–10%) vs high tax rate (18%).
3. High diesel cost with no GST credit.
4. New entrants undercut prices without knowing GST rules.
5. Tender competition in both public and private sectors causes losses.
6. Tax pendency and penalties leading to closures.
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Slide 7 – Prayer to Authorities
We respectfully request:
1. Exemption for borewell drilling for agriculture & drinking water projects.
2. Or GST rate reduction from 18% to 5% in line with ITC availability.
3. Clear notification on GST applicability to avoid disputes.
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Slide 8 – Conclusion
Borewells are critical national infrastructure for water security, food security, and rural livelihoods.
Current GST regime is unsustainable for this sector.
Lower GST or exemption will:
Support rural & agricultural development.
Help industry survive & stay compliant.
Reduce disputes & improve tax collection efficiency.