CBEC has vide Circular No. 157/8/2012-ST dated 27.04.2012, clarified that market fee (mandi shulk) charged by Agricultural Produce Marketing Committee (APMC) /Board is covered under business auxiliary services and eligible for exemption under NN 14/2004 ST dated 10-09-2004.
Notification No. 14/2004 St dated 10-09-2004 exempts Business auxiliary services provided in relation to agriculture, printing, textile processing or education, from the whole of service tax leviable thereon under section 66 of the said Finance Act.
Circular No. 157/8 /2012-ST, New Delhi, 27th April, 2012
Subject: Services provided by the Agricultural Produce Marketing Committee (APMC) /Board– regarding.
Representations have been received, seeking clarification regarding the levy of service tax on certain services provided by the Agricultural Produce Marketing Committee (APMC)/Board, using the ‘market fee’, in the light of Notification No.14/2004-ST. The representations have been examined.
2. APMCs are statutory bodies created with a view to regulate agricultural produce markets. APMCs charge market fee for issuing licenses to whole sale trader-cum-commission agent, wholesale traders, commission agent, mill / factory / cold storage owners or any other buyers of agricultural produce, for an agricultural year. The amount so collected by the APMC, from the licensees, is used for providing among other things facilities like roads, drinking water, weighing machines, storage places, street lights, etc. in the market area. These services are not provided on one-to-one basis i.e. in consideration or as an obligation to the persons who have tendered the license fee. Some of these services may be capable of being used more conspicuously by the licensees but they do not form part of any contractual obligation to any of the licensees.
3. Reportedly some field formations are inclined to take a view that services provided by the APMCs are in the nature of Business Support Service (BSS), and hence the exemption made available for BAS in relation to agriculture vide Notification No.14/2004-ST will not be applicable. As a consequence, service tax becomes leviable on the ‘market fee’ popularly known as ‘mandi shulk’, collected by the APMC.
4. When examined with reference to its constitution and functions, the services provided by APMC out of the ‘market fee’ collected from the licensees, do not appropriately fall under the category of BSS. The distinction between BSS and BAS is explained in the instructions dated 28.02.2006 issued from F.No.334/4/2006-TRU. In the light of the above instruction, the service provided by APMC out of the market fee is not in the nature of ‘outsourced service’. It is not possible to hold that the licensees have outsourced the development and maintenance of agricultural market to the APMC, which could have been otherwise undertaken by them, solely in their business interest. Development and maintenance of agricultural market infrastructure undertaken by APMC in accordance with the statute, is for the benefit of all users, rather than an activity solely in the interest of licensees. Hence, APMC cannot be said to be rendering ‘business support service’ to the licensees. ‘Market fee’ is not in the nature of consideration for such BSS.
5. As statutory bodies, APMCs provide basic facilities in the market area out of the ‘market fee’ collected from the licensees, mainly to facilitate the farmers, purchasers and others. APMCs provide a host of services to the licensees in relation to the procurement of agricultural produce, which are ‘inputs’ in terms of the definition given in section 65(19) of the Finance Act, 1994 itself. To that extent the meaning of ‘input’ is much wider in scope than the meaning assigned in rule 2(k) of Cenvat Credit Rules, 2004. Therefore, it is clarified that the services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-ST.
6. However, any other service provided by the APMCs for a separate charge(other than ‘market fee’) to either the licensees or farmers or any other person, e.g. renting of shops in the market area, etc. would be liable to tax under the respective taxable heads. This Circular may be communicated to the field formations and service tax assessees, through Public Notice/Trade Notice. Hindi version to follow.
Under Secretary, TRU
what is market fee % taken from former in APMC
We are manufacturer of whole wheat flour. We are purchasing wheat from supplier not with farmer.and purchase wheat production in 10 days and sale process material in 10 days. No stock space in my plant. I ask with lawyer abouts this point. and argue with apmc office. But apmc not accept our . He show me laws book. He need proof of avidance. So if i give his party bill is it accaptable? He req market ses fees pavti. We purchase many time stock wheat. Then how is it possible for supplier. Pls suggest me
Commission received from Food Corporation of India for service of arrangement of colleciotn of agriculture food of farmer
Whether it is exempt or not
Commission received from Food Corporation of India on service provided for arrangement of agriculture produce of ferment to sale
Whether it is exempt in the hand of commission agent or not ?