March 2, 2010

In order to boost India's agriculture, Finance Minister Pranab Mukherjee recently announced a series of tax relief that include concessional customs duty and exemption of service tax on setting up of cold chains.

Outlining the objectives in his Budget speech, the Finance Minister said a focused attention is needed to create a strong supply chain for perishable farm produce, setting up infrastructure facilities for processing of such produce and infusion of technology to boost agriculture  production.

In order to achieve the objectives, Mukherjee proposed a concessional import duty of 5% with full exemption from service tax to set up and expand cold chains to preserve farm produce as well as milk, meat, poultry products.

In India wastage of fruits and vegetables, which are perishable in nature, stands at over INR50,000 crore (US$10.8 billion) a year that nears the annual food subsidy bill.

"Similar attention needs to be paid to related sectors such as apiary, horticulture, dairy, poultry, meat, marine and aquaculture," he added.

Faced with the criticism of high food prices, the Finance Minister exempted from service tax transportation of cereals and pulses by road. "Their transportation by rail would remain exempt," he added.