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.