Taxability on Goods Transport Agency.
Question:- Is transportation of unprocessed farm-fish/farm-shrimps taxable?

Answer.
01. Definition:-As defined in section 65B(26), 'goods transport agency' means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called (issue of consignment note is mandatory under rule 4B of Service Tax Rules, 2004).

02. Fish/Shrimp as goods: 'Goods' means every kind of movable property that can be brought to the market to be bought and sold. Hence, fish/shrimp fall under the category of 'goods'.

03. Scope of exemption granted under Item No.21(a) of Notification No.25/2012 dated 20-6-2012:- Item No.21(a) of Notification No.25/2012 dated 20-6-2012 grants full exemption from service tax to transport the products 'Fruits, Vegetables, Egg, Milk, Food grains or pulses' by road in a goods carriage. These articles are of daily necessity and are transported throughout the year and hence the exemption is granted since it serves the common man from the burden of possible price-rise.

04. Commercially processed and canned mushrooms :- Not granted Service-Tax-exemption since commercially processed and canned mushrooms could not be brought under the category of 'vegetables' since, having regard to the object behind the exemption, only fresh vegetables which are transported by road from the grower to the consumer would be eligible for exemption (Agro Dutch Industries Ltd -Vs-CCE(2011)32 STT 285/12 taxmann.com 282 (New Delhi - CESTAT).

05. Amendment of entry 21 by Notfn.No.3/2013-Service Tax dated 01-03-2013:- The earlier definition was substituted wherein the amended version of 21 (d) exempts 'foodstuff including flours, tea, coffee, jiggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages;'

06. Whether unprocessed fish/shrimp can be covered under foodstuff, to avail tax-exemption :-
Foodstuff:- Foodstuff (usually plural) means a substance that can be used or prepared for use as
food. Then it is obvious to know the definition of' Food'.

Food:- Any solid substance (not liquid) that is used as a source of nourishment. Material, usually of plant or animal origin, that contains or consists of essential body nutrients such as carbohydrates, fats, proteins, vitamins or mineral and is ingested and assimilated by an organism to produce energy, stimulate growth and maintain life.

07. Whether unprocessed fish/shrimp can be covered under Agricultural produce to avail tax-exemption:-

Changes Applicable from the date of enactment of Finance Bill 2013.(Expansion in the Scope of Negative List).
The agriculture sector has been supported by keeping the bulk of services relating to agriculture or agriculture produce in the Negative list vide Finance Act-2012.

(1) The services relating to agriculture shall include by way of agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;

(2) 'Agriculture ' means the cultivation of plants and rearing of all time farms of animals, (except horse farms)..(Hence, all-time-farming of fish or shrimp can be put under the category of 'Agriculture'.

(3) 'Agricultural produce' means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. As a result of this, agricultural operations which are directly related to the agriculture or agricultural produce has been kept out of purview of Service Tax.

Thus, it can be opined that the farm-fish or farm-shrimp without any further processing is done or such processing is done (may be severing of head) which does not alter its essential characteristics, is kept out of purview of Service Tax.

Hence,
(1) Farming or cultivating fish/shrimp is covered under the definition of Agriculture.
(2) And fish/shrimp is covered under the definition of Agricultural produce.
(3) Hence, a GTA transporting such farm-fish / farm-shrimp which is not processed further or subjected to a process (may be severing of head) which does not alter its essential characteristics must be out of the purview of Service Tax. (Process of fish/shrimp that alters or does not alter its essential characteristics decides the tax liability or otherwise).
(4) No departmental cases are found for the taxability on transportation of farm-fish or farm-shrimp by GTA, and no cases are found yet against any GTA for non-payment of Service Tax by considering the farm-fish or farm-shrimp as either 'food-stuff' or 'agricultural produce.'

(5) Request Hon'ble members to express their opinions on this issue clarifying whether,
(a) Can transportation of the farm-fish or farm-shrimp be exempted from Service Tax liability
of a Goods Transport Agency treating it as food-stuff?

(b) Can transportation of the farm-fish or farm-shrimp be exempted from Service Tax liability
of a Goods Transport Agency treating it as 'Agricultural Produce'?

From:
V Seetha Ramaiah,
Advocate - Service Tax,
Visakhapatnam.
Cell: +91 99 08 22 84 26