Budget 2014-15: Rice Immune from Service Tax-In July 2012, rice was categorized as an agricultural product instead of agricultural produce and was levied with service tax, but in the interim budget 2014-15, Finance minister has exempted unloading, loading and storage of rice from service tax and is to be treated as a processed item.

In his budget speech, Chindambara, said “By 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”.

The exemption in service tax on rice is in realization to the recent resistance in South States to impose such charge, where the Tamil Nadu Chief Minister J Jayalalitha has demanded that the service tax secured should be repaid to the assesses.

In 2013, State for Consumer affairs & Public distribution system said that rice does not meet the definition of “agricultural produce” and thus no longer to be exempted from Service tax.  With Effect of this in Tamil Nadu the charges of Service tax on storage & transport will increase affecting the public distribution costs.

Rice not being treated as agricultural product and not agricultural produce has raised concerns for the population in south India where rice is consumed as staple food subjecting to Service tax of 12.36%. Chief Minister of Tamil Nadu has requested Prime minister to announce rice as “Unambiguously” an agricultural product.

The rise in service tax would raise the cost in open market and would also put extra liability on state government and disrupt food security.