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Borewell rig owners in the small town of Tiruchengode in Tamil Nadu, who operate their machines across the country, are worried over the applicability of Goods and Services Tax (GST).
Out of nearly 10,000 rig vehicles in the country, nearly half belong to residents of Tiruchengode, nearly 400 km west of Chennai. Providing service to agriculture sector, the industry was earlier exempt from Service Tax and are hoping for exemption under GST Act. However, there is no clarity on the GST as yet.
The rigs criss cross the country. Each vehicle costs over ₹1 crore and carries 5-6 workers, sources said.
“Since the introduction of GST, our members are not clear how it will impact us. The government should exempt services provided by us to agriculture from GST Act as was done under Service Tax,” said Paari Ganeshan, President, Tiruchengode Lorry Owners Association, and former president of Tiruchengode Rig Owners Association.
Supply of water for production of any agricultural produce was excluded from Service Tax as it is covered by the scope of the Negative List of the Finance Act,1994, he told BusinessLine . “We want a similar assurance from the government on GST. We are still working with the same rules given under Service Tax,” he said. “We have urged the government to clarify the position ,” he added.
The borewell drilling pattern varies in various states. It is not possible to estimate duration of work, quantum of work or tax liability and it is impossible to predict seasons to obtain Certificate of Registration that is required for the GST. “Because of the peculiar nature of the business, it is difficult to collect tax on it,” said Ganeshan.
Diesel, which accounts for 60 per cent of operating cost, is kept out of GST. “We are unable to utilise input credit on diesel. This will lead to a cascading effect and increase the burden on farmers by increase drilling cost,” he said.
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