Tax reliefs to boost agri, food processing

In order to spur growth in the agriculture sector and reduce wastage of farm produce, Finance Minister Pranab Mukherjee today announced a series of tax reliefs that include concessional customs duty and exemption of service tax on setting up of cold chains.

Outlining the objectives in his Budget speech, the Finance Minister said a focused attention is needed to create a strong supply chain for perishable farm produce, setting up infrastructure facilities for processing of such produce and infusion of technology to boost agri-production.

In order to achieve the objectives, Mukherjee proposed a concessional import duty of five per cent with full exemption from service tax to set up and expand cold chains to preserve farm produce as well as milk, meat, poultry products.

In India, wastage of fruits and vegetables, which are perishable in nature, stands at over Rs 50,000 crore a year that nears the annual food subsidy bill.

"Similar attention needs to be paid to related sectors such as apiary, horticulture, dairy, poultry, meat, marine and aquaculture," he added.

Experts said exempting the food processors from service tax for expansion of their units would benefit manufacturers of juice, jam, sauce and pickles among others.

Faced with the criticism of high food prices, the Finance Minister exempted from service tax transportation of cereals and pulses by road. "Their transportation by rail would remain exempt," he added.

Mukherjee announced concessional import duty of 5 per cent to establish mechanised handling systems and pallet racking systems in 'mandis' or warehouses for foodgrain and sugar.

Full exemption from service tax for the installation and commissioning of such equipment has also been provided.

The move would help Food Corporation of India, which is facing a labour problem, in handling the foodgrain stored in its warehouses, experts said.

Mukherjee allowed duty-free import of refrigeration unit, which is required to make refrigerated vans or trucks.

He said concessional custom duty of 5 per cent would be offered to specified agricultural machinery not manufactured in India. He also exempted trailers and semi-trailers used in agriculture from excise duty.

To promote good quality and disease-resistant  Seeds, he proposed to exempt the testing and certification of agricultural seeds from service tax.