Circular No. 157/8 /2012-ST dt 27 April 2012, regarding Agricultural Produce Marketing Committee / Board

Issue:

Some Officers are inclined to take a view that services charged as Market fee provided by the APMCs are in the nature of Business Support Service (BSS), and hence the exemption made available for BAS in relation to agriculture vide Notification No.14/2004-ST will not be applicable.

Market Fee Collected by APMC

 1.APMCs are statutory bodies created with a view to regulate agricultural produce markets.

2. APMCs charge market fee for issuing licenses to whole sale trader-cum-commission agent, wholesale traders, commission agent, mill / factory / cold storage owners or any other buyers of agricultural produce, for an agricultural year.

3. The amount so collected by the APMC, from the licensees, is used for providing among other things facilities like roads, drinking water, weighing machines, storage places, street lights, etc. in the market area.

4. These services are not provided on one-to-one basis i.e. in consideration or as an obligation to the persons who have tendered the license fee.

5. Some of these services may be capable of being used more conspicuously by the licensees but they do not form part of any contractual obligation to any of the licensees.

6. However it has been clarified that, reference to its constitution and functions, the services provided by APMC out of the ‘market fee’ collected from the licensees, do not appropriately fall under the category of BSS and hence market fee is not in the nature of ‘outsourced service’. 

7. It is not possible to hold that the licensees have outsourced the development and maintenance of agricultural market to the APMC, which could have been otherwise undertaken by them, solely in their business interest.

8.Development and maintenance of agricultural market infrastructure undertaken by APMC in accordance with the statute, is for the benefit of all users, rather than an activity solely in the interest of licensees.

9. Hence, APMC cannot be said to be rendering ‘business support service’ to the licensees. ‘Market fee’ is not in the nature of consideration for such BSS. Therefore, it is clarified that the services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-ST.

10. Other services provided by APMS is taxable.

However, any other service provided by the APMCs for a separate charge(other than ‘market fee’) to either the licensees or farmers or any other person, Such as. renting of shops in the market area, etc. would be liable to tax under the respective taxable heads.