The Hindu Business Line : Govt offers tax shift from booking agencies to consignors

IN a climb down to placate the striking transporters, the Finance Ministry has offered to shift the incidence of service taxation from goods booking agencies to consignors in the organised industry.

The Finance Ministry has listed out seven broad categories of consignors (those booking the goods) who would have to pay the service tax themselves, instead of the burden of collection and payment falling on the booking agencies.

These categories include factories registered under the Factories Act, companies registered under the Companies Act, public sector corporations, societies, cooperative societies, any dealer of excisable goods and any other corporate body.

The offer, in effect, means that goods booking agencies would not have to bother about collection and payment of the 10-per cent service tax, if they were ferrying goods booked on behalf of entities falling under any of the seven categories of consignors.

The offer was discussed during the meeting held by the Revenue Secretary, Ms Vineeta Rai with the representatives of the All India Motor Transport Congress (AIMTC) on Monday. However, the meeting ended without any formal agreement.

"The proposal would have required us to collect and pay taxes for transporting materials from those sectors, which are not organised. This would include items such as food grains and construction material," sources in the transport industry said.

Finance Ministry officials told the transporters that if the offer was accepted by the transporters, it would mean that only "pure booking agents" who hire trucks to ferry goods would be liable to collect and pay service tax on all other cases.

However, the offer appears to have not gone well with the AIMTC that feels that the burden of service tax on the unorganised sector would ultimately fall on the entire transport industry and not solely the booking agents.

The body has argued that hardly a miniscule portion of the transport industry can be dubbed as "pure" booking agents. Most market players who book goods have their own fleet, AIMTC has pointed.

The Finance Minister, Mr P. Chidambaram had, in his maiden Budget under the United Progressive Alliance (UPA) Government, imposed the 10 per cent service tax on goods booking agents. He had, however, clarified that the tax would not be applicable to the truck owners. But the transport industry has disputed the impost, citing the same argument that there are few pure booking agents.

With no agreement reached at the meeting with the Revenue Secretary, the striking truckers are now threatening to cripple the economy for a prolonged period unless the service tax is withdrawn in its entirety. They have asked the Government to stick to the 1997 agreement that "(service) tax would not be collected from road transport operators."