Jaya slams levy of service tax on rice, dubs as discriminatory

Strongly opposing the Union Finance Ministry's decision to exclude rice from agricultural produce list and levying service tax on it, Tamil Nadu Chief Minister Jayalalithaa today said it smacked of "unfairness" against people in south and east where the grain is the staple food.

In a letter to Prime Minister Manmohan Singh, she sought his personal intervention in the issue and sought to remit and return the already levied service tax since July 1, 2012.

Calling the Finance Ministry's move as "invidious, discriminatory and completely unjust," she observed that this would be an additional burden to the state government towards the expense incurred for the Public Distribution System.

"The interpretation given by the Ministry of Finance defies logic and common sense. From time immemorial, rice has been regarded as an 'agricultural commodity'," she said, adding Tamil Nadu has already taken a clear stand that rice should be exempted from the levy of the Goods and Services Tax.

She pointed out that rice had been exempted from service tax in Central government's notifications in 2002, 2003 and 2004, when Service Tax was levied on storage of goods as it was then defined as "agricultural produce".

The new definition in Section 65B (5) of the Finance Act, 2012, removed the more inclusive definition which specifically mentioned Rice.

Union Finance Minister in a November 8, 2013 letter to the Minister of State (Independent charge) for Consumer Affairs, and Public Distribution System clarified that "Rice" and "ginned and baled cotton" do not fall within the definition of "agricultural produce" under Section 65B (5) and accordingly, from December, 2013, service tax is being collected on storage of rice, with effect from 1st July, 2012.

The Ministry's stand that rice was not an agricultural product was "discriminatory, regressive and indefensible," as other cereals including wheat were exempted from levy of service tax, she said.

"It 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 consumed. It will 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," she added.