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Service tax on goods transport agencies soon: Chidambaram

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The rate of service tax on goods transport agencies would be 10.2 per cent.

New Delhi , Nov. 30

AFTER the 7.7 per cent increase in freight rates on select bulk commodities announced by the Railways last week, the stage is now set for the road sector to follow suit, courtesy the Finance Ministry's likely move to impose a 10.2 per cent service tax on goods transport agencies "in the next few days."

The Finance Minister, Mr P. Chidamabram, confirmed here today that the levy would be introduced "very soon" in the next few days, after it receives the necessary clearance from the Law Ministry for notification.

He said that the rate of service tax on goods transport agencies would not be different from that currently being on other services, that is, 10.2 per cent.

The move to bring goods transport agencies under the service tax net was proposed in the 2004-05 Union Budget, but hit a virtual roadblock on account of stiff resistance from transporters who resorted to a nation-wide strike in August.

Their main grouse was that the bulk of truckers in the country (who are also engaged in cargo booking) are small-time operators, who are not in a position to comply with the formalities of payment of service tax.

Following this, a six-member committee was finally set up by the Government under the Member, Central Board of Excise and Customs, Mr S.K. Bharadwaj, to frame an appropriate mechanism for collection and payment of service tax by goods transport agencies.

The committee, which submitted its report on October 27, is understood to have suggested shifting the burden of service tax payment on the consignor/consignee rather than making the goods transport agency a collecting agency.

This mechanism of putting the liability for payment of service tax on the persons paying the freight charges was specifically suggested in the case of consignors/consignees belonging to the organised sector.

The latter included any factory registered under the Factories Act, 1948, any company established under the Companies Act, 1956 and all other organised sector entities.

"Shifting the burden of service tax payment on to the consignor/consignee would lessen the responsibility of tax collection and payment and observance of procedural formalities of operators in the transport sector to a large extent, while it would not cast any additional burden on the consignor or the consignee.

Being an indirect tax, the service tax burden is ultimately borne by the person who bears the freight cost," the committee had said in its report.

However, for transport of goods by road where the consignor/consignee is in the unorganised sector, the committee suggested that the liability to collect and deposit the service tax be put on the goods transport agency.

The panel further recommended an abatement of 75 per cent on the gross freight amount — the 10.2 per cent tax would be applicable only on the balance 25 per cent — while proposing a complete exemption from service tax on cases where the gross freight chargeable on consignments carried in a vehicle does not exceed Rs 1,500 or where the gross freight in respect of individual consignments does not exceed Rs 750.

The committee had also defined goods transport agency to cover those commercial concerns which

When asked whether the Finance Ministry had accepted completely all the recommendations of the committee, Mr Chidambaram said: "We have made some minor changes here and there."

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