The Tamil Nadu Advance Rulings Appeal Authority (AAAR) has ruled that drilling boreholes for water supply in agricultural land is not an “agricultural support service”.
The appellant, Tvl. Vallalar Borewells said that they are engaged in the business of drilling borehole drilling service to farmers. Water is a primary source for crop farming. Likewise, the compressors they rent to farmers allow the engine to run and evacuate the water necessary for cultivation and related agricultural uses. They also get a confirmation letter from the farmer that the well drilled in their land is being used for agricultural purposes only.
The appellant requested the advance ruling on whether the provision of services provided by the appellant relates to agricultural operations directly related to the raising of agricultural products. and plowing, and Provision of compressors for pumping water from boreholes to agricultural fields.
The AAR ruled that a compressor is not an agricultural machine and is a general purpose machine. In addition, the only supply of agricultural machinery with crew and operators is indicated as “assistance service for agriculture”. Therefore, the rental of the same is also not an “agricultural support service” classified in SAC 9986 and the applicant is not eligible for the exemption.
The appellant’s main argument regarding the activity undertaken is through farming operations connected with the production of any agricultural product, etc., prima facie, in the GST economy two classifications cannot be adopted for same activity based on end use or location, etc. The appellant itself has already classified its supply of well drilling services under 9954 for the purpose of paying tax; it defies logic as well as the law that the same activity if carried out on agricultural land will be classified under a different heading 9986.
The two members, MA Siddique and GV Krishna Rao, said “we find no reason to interfere with the order of the advance ruling authority in this matter.”
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