Apex industry body ASSOCHAM has urged the Finance Ministry to keep all services provided for agricultural produce outside service tax ambit.
"Services like warehouse management, security, laboratory testing and others that are essential to secure storage of agri-produce should be included in the negative list or in the list of exempted services," recommended ASSOCHAM in its pre-budget memorandum submitted to the FinMin.
Besides, ASSOCHAM has also suggested the government for exempting services like leasing of land and agricultural equipment, agri-extension services and others provided in rural areas or marketing agricultural products from service tax.
In order to prevent misuse of exemptions, appropriate rules can be framed for certification of services provided in rural areas by governmental bodies like the gram panchayats, village post-master and others, highlighted the ASSOCHAM pre-budget memorandum.
"Unscrupulous players are taking undue advantage of lower levels of consumer awareness of high-quality goods in rural India and flooding them with sub-standard and counterfeit products," said D.S. Rawat, secretary general, ASSOCHAM.
"The government should partner with private sector for developing market infrastructure in rural areas by providing appropriate incentives and exemption from service tax in respect of input services that are used for strengthening infrastructure in rural markets," said Rawat.
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ASSOCHAM has also recommended the government to cover the processing of whole pulses into split pulses under the negative list of service tax. "Levy of service tax on such processing activities that are carried out in factories adds to the high prices of pulses, which is a staple diet for common man."
Prices of pulses have been showing an upward trend during the course of past few years owing to lower production and impact of adverse weather.
On a similar corollary, Finance Ministry has exempted levy of service tax on processing of paddy into rice.
Currently, negative list of services includes processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun-drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but makes it only marketable for primary market.