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June 2012

Clarification reg. taxability of market fees collected by APMCs — Circular No. 157/08/2012- ST, dated 27-4-2012.

By Tarun Ghia, Brijesh Cholera, Pratik Mehta, Chartered Accountants
Reading Time 2 mins
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It has been clarified that the services provided by APMC for which the ‘market fee’ popularly known as ‘mandi shulk’ is collected from the licensees does not fall under the category of ‘Business Support service’ as the services provided are not in the nature of ‘outsourced service’ and development and maintenance of agricultural market infrastructure undertaken by APMC in accordance with the statute is for the benefit of all users rather than activity solely in the interest of licensees.

APMCs provide basic facilities in the market area out of the ‘market fee’ collected by them mainly to facilitate farmers, purchasers and others and a host of services to the licensees in relation to procurement of agricultural produce, which are ‘inputs’ as per section 65(19) of the Act; therefore, services provided by the APMCs are classifiable under ‘Business Auxiliary services’ and hence, benefit of exemption under Notification No. 14/2004-ST is available. However, any other service provided by the APMCs for a separate charge (other than ‘market fee’) either to the licensees or to the farmers or to any other person, e.g., renting of shops in the market area, etc. would be liable to tax under the respective taxable heads.

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