The Hindu Business Line : Don't levy goods transport service tax on consignor: TN Chamber

THE Tamil Nadu Chamber of Commerce and Industry has urged the Union Finance Minister, Mr P. Chidambaram, to not to impose the levy of service tax on consignor/consignee under any circumstances.

In a statement here, the Chamber has pleaded that the Central Government should refrain from implementing the recommendations of the Committee constituted by the Government for looking into the modalities for collection of service tax levied on goods transport agency as it would be clear violation of the judgement of the Supreme Court.

In case, if it is to be levied compulsorily on goods transport agency, the tax should be collected and deposited only by such agencies. Elaborating on the point, the chamber said that when the levy was announced in the Union Budget in 2004-05, stiff resistance followed from the road transporters and the Government had constituted a Committee for the purpose of looking into Appropriate Mechanism/Modalities for collection and payment of service tax on Goods Transport Agency.

The committee had recommended that in view of the illiteracy, unorganised nature and involvement of multiple players in the transport sector, the burden of service tax on transport of goods by road should be borne only by the consignor or consignee in the organised sector paying the freight charges and not by `goods transport agency'.

This would mean all types of trade and industrial organisations big or small would be obliged to collect and deposit service tax on transport of goods by road. As per the transportation not involving such organised consignors or consignees, the Committee has recommended that the liability to collect and deposit service tax should be on the "goods transport agency".

Placing the onus of collection and deposit of service tax on service receivers and not on service providers contradicts the very basic concept of service tax and a clear transgression of the dictate of the Supreme Court.

Further, this dual contradictory recommendation is objectionable besides being illegal and not enforceable. Trade and industry all over the country are shocked by this recommendation of the Committee as its implementation would subject them to inconveniences and problems. It should be noted that in the case of the 72 services, subjected to service tax, the onus of collection and deposit has all along been only on service providers and not on service receivers.

When the Central Government first introduced the service tax in the year 1997 on transport of goods on road, there was widespread agitation by lorry transporters, which forced the Central Government to re-impose the levy on consignors or consignees paying the freight charges.

Several trade and industrial associations across the country including the Tamil Nadu Chamber of Commerce and Industry moved the High Courts in the respective States and obtained interim injunctions against the unjustified levy. Subsequently, the Supreme Court struck down the provisions of the Finance Act 1994 as amended in 1997 in so far as they made the persons other than the clearing and forwarding agents or the persons other than the goods transport operators as being responsible for collecting the service tax, declaring that the said provisions were ultra vires the Act itself, it has noted.

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