Finance Minister P. Chidambaram, presenting the interim budget for 2014-15 in the Lok Sabha Monday, announced abolition of service tax on loading, unloading and storage of rice.
Rice, a staple food in south and east India, was originally exempt from service tax as it was classified as agri-produce. But later the finance ministry said only paddy is agri-produce, and if it is processed/dehusked, the resultant product is not.
The finance minister's decision was also seen as a result of the huge political pressure he came under in his home turf, Tamil Nadu, from the ruling AIADMK, the DMK and other parties in the state.
Tamil Nadu Chief Minister J. Jayalalithaa in a recent letter to Prime Minister Manmohan Singh urged him to "unambiguously declare rice to be agricultural produce and hence not subject to the levy of service tax for all services related with it".
"In a thoughtless, insensitive and discriminatory manner, the finance ministry 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 (United Progressive Alliance) government has become from the concerns of the common people," she has said.
Jayalaithaa said the service tax already collected with effect from July 1, 2012, should also be remitted and returned to assessees.
DMK president M. Karunanidhi has also voiced his opposition on the issue.
