Summary of case:
The applicant provides drilling of borewell services mainly to agriculturists engaged in raising of agricultural crops. Water is a part and parcel of essential requirements in cultivation and raising of agricultural crops. Likewise, compressors which are let out by them to agriculturists enable the motor to function and discharge water as required for cultivation and allied agricultural uses. They also obtain a confirmation letter from the agriculturist that the borewell drilled in their land is used only for the agricultural purpose.
The applicant has sought Advance Ruling on the following questions:
1. Whether the following supply of services provided by the applicant are in relation to agricultural operations directly in connection with raising of agricultural produce:
i. Drilling of Borewells for supply of water for agricultural operations like cultivation including seeding, planting and ploughing.
ii. Letting out of compressors for pumping of water from the borewells to the agricultural fields.
2. If the answer to the above question is in the affirmative, whether the said services are covered by the entry SI.No 54 of Notification 12/2017 CT(Rate) dated 28.06.2017.
It is evident that Provision of agricultural machinery with crew and operators and operation of irrigation systems for agricultural purposes are listed as Support services to crop production. In the case at hand the applicant does not undertake the operation of irrigation system for agricultural purposes and also compressors are not agricultural machinery. They undertake the activity of drilling of borewells in the agricultural land and let out compressors. The said activity is not classifiable under SAC 9986. It is pertinent to note that even setting up of an irrigation system with pipe lines are classifiable only under SAC 9983 and the activity of operation of such irrigation system alone is coded as Support service to agriculture. In the case at hand, the applicant undertakes only drilling of bore wells in the agricultural land and are letting out compressors. The applicant are classifying the same under SAC 995434, when the said activity is undertaken in places other than agricultural land and under SAC 995434 when the drilling is done in other than agricultural land.
Water-well drilling services are specifically covered under 995434 and the said category includes all Water-well drilling services without any exceptions. Therefore, it is evident that the drilling of borewell without exceptions (even in the agricultural land) is a construction service involving drilling water well and not a support service for agriculture. As the activity do not merit classification under SAC 9986, the applicant is not eligible for exemption as per Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.
In respect of letting of Compressor, it is not an agricultural machinery and is a General-Purpose Machinery. Also, only provision of agricultural machinery with crew and operators are stated as Support service for agriculture. Therefore, letting out of the Compressor is also not a Support service for agriculture classifiable under SAC 9986 and the applicant is not eligible for exemption as per Sl. No. 54 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017.
CRUX:-1.
i. Drilling of Borewells for supply of water in agricultural land is not Support Service for agriculture classifiable under
SAC 9986.
ii. Letting out of compressors for pumping of water from the borewells to the agricultural field is not Support Service for agriculture classifiable under SAC 9986
2. The two activities of the applicant are not Support service for agriculture classifiable under SAC 9986 and therefore the exemption at SI.No.54 of Notification No.12/2017-C.T.(Rate) is not applicable to the activities of the applicant.