The Hindu Business Line : A taxing strike

TO APPEASE THE striking transporters, there is an ominous proposal from the Finance Ministry to shift their service tax liability on to consignors, thus turning the whole concept of service tax on its head. Generally, service tax is payable by the one providing the service, except where the service-provider is a non-resident or is from outside India, without any office in the country. To extend such a quirk to goods consignment, making the service receiver liable to pay the tax, can add to administrative and compliance costs exponentially, even if the Government has chosen to herd within the tax net only consignors in the organised sector such as registered factories, companies and so on. Again, looking at the hefty burden of 10 per cent that would add to the transport charges, such a selective scheme of cornering the organised consignors would skew their cost structure vis-à-vis the unorganised, giving incentive for evasion.

If the government's repeated assertion that the service tax will have nothing to do with the truck owners and operators but will only apply to the booking agents goes unheeded, it is because in most cases the transport companies and the agents are hand-in-glove. The strike brings to the fore the nexus between the cargo booking agents and the big transport companies. One can understand if the current protest was directed against the petty corruption and the harassment in the hands of administration. Far from it. It is a pity that the transport operators may have no qualms paying bribes to get away with overloading and other irregularities but are reluctant to contribute to the exchequer. While the government's insistence on levying service tax on booking agents is in line with its similar policy earlier announced in respect of brokers and cable operators, the modus operandi in respect of the booking agents has to be different. After all the road transport sector is dominated by individual operators owning one or two vehicles and many of them lacking formal education; the government needs to work out a proper scheme that goes down easily with these people.

Fortunately for the government, the strike, it appears, will fizzle out because the All India Motor Transport Congress is in some disarray. Sharp differences have surfaced among its 55-member joint action committee over such issues as the continuation of the strike and acceptance of the compromise formula as proposed by the government. Several parallel road transport organisations, both at the national and the State levels, that have sprung up do not see eye-to-eye with the AIMTC on the strike issue. As it is, the strike has been only partially successful. The response to the strike call has varied from State to State. In some, there has been no response at all. Yet, the strike could not have come at more inopportune time. Inflation was already moving up hustled along by the increase in the prices of energy commodities. The strike has only exacerbated the situation for producers and consumers alike. It is time the AIMTC took a hard look at what is on offer: it cannot expect the Finance Ministry to bend over backwards any farther.