Chennai : Taking strong objection to the Union Finance Ministry’s description of rice as a non-agricultural product for the purpose of levying service tax, Tamil Nadu Chief Minister J Jayalalithaa on Wednesday wrote to Prime Minister Manmohan Singh asking him to unambiguously declare rice to be an agricultural produce.
She has charged that the Finance Ministry’s interpretation of rice as a non-agricultural produce “smacks of unfairness against people residing in certain regions of the country, especially in the South and the East where rice is the staple food grain.” The move will also raise the price of rice in the open market, particularly at a time when food inflation is already weighing down heavily on the common people, it is pointed out.
In her letter, a copy of which was released to the media, she said an ‘‘invidious, discriminatory and completely unjust situation’’ has arisen as a result of an “extremely insensitive and regressive interpretation” of certain provisions of the Service Tax legislation. Besides, this has made services like storage and handling associated with rice liable to levy of Service Tax.
She further said such an interpretation would put an additional burden on the State towards the expense incurred for Public Distribution System and weaken efforts to provide food security to all.
Jayalalithaa pointed out that in 2002, when Service Tax was levied on storage of goods, rice had been exempt since it was defined as “agricultural produce.’’ However, 10 years later, the definition of “agricultural produce” was changed when the switch over was made to the levy of service tax.
The new definition in Section 65B (5) of the
Finance Act, 2012, removed the more inclusive definition which specifically mentioned rice.
The Finance Ministry, Jaya recalled, had in November last year clarified that rice and ginned and baled cotton do not fall within the definition of agricultural produce.
Consequently, since December 2013, service tax is being collected on storage of rice, with effect from July 1, 2012. “This very strange stance taken by the Union Finance Minister that rice is not an agricultural product while other cereals, including wheat, are agricultural produce and hence exempt from levy of service tax on storage and other services is discriminatory, regressive and indefensible,” the Chief Minister said.
Hence, she argued that using the GST argument to refuse to include rice within the definition of “agricultural produce” is not an appropriate stance.
“In a thoughtless, insensitive and discriminatory manner, the Ministry of Finance has proceeded to levy service tax on the storage of rice alone amongst all food grains. It is yet another instance of how distanced and divorced the UPA Government has become from the concerns of the common people,” she said, urging the Prime Minister to intervene urgently and exempt rice from this category.