CBEC clears the enigma over service tax on seed testing

CBEC clears the enigma over service tax on seed testing :

1.       Prior to introduction of negative list of service technical testing and analysis and technical inspection and certification of seeds, rendered by notified Central/ State Seed Testing Laboratories /Agency were exempt from Service Tax  vide notification No.10/2010-Service Tax

2.       The above notification was rescinded by subsequent notification 34/2012 dated 20-06-2012 after introduction of negative list of services

3.       In negative list of services, u/s 66D w.e.f. 01-07-2012, (d) services relating to agriculture or agricultural produce by way of— (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing; was kept outside the tax net

4.       However by Finance Act 2013 word “seed” preceeding “seed testing “ was omitted w.e.f. 10-05-2013

5.       W.e.f. 10-05-2013, negative list of services read as under (d) services relating to agriculture or agricultural produce by way of— (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing

6.       However agriculture produce under section 65B((5) is defined as under: “ agricultural produce ” means any produce of agriculture on which either no further 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

7.       Admittedly and apparently seeds are outside the purview of agriculture produce.

8.       This resulted in issue of service tax notices to this sector in abundance.

9.       However, CBEC vide Circular no. 354/279/2015-TRU dated 26-11-2015 has clarified that purpose of amendmend was to widen its scope and not restrict it a manner to exclude seed testing and other incidental services.

10.   The departmental has further clarified that without certification and other services seed testing is futile exercise hence such other services like seed certification, technical inspection, technical testing, analysis, tagging of seeds, rendered during testing of seeds, are covered within the meaning of ‘ testing ’

11.   Therefore, such services are not liable to Service Tax.