The Hindu Business Line : Ministry clarifies on payment of service tax on goods transport agencies

THE Finance Ministry on Tuesday clarified that the apprehension among a section of traders that they would have to pay the service tax levied on goods transport agencies were misplaced.

This clarification comes in response to reports that a section of traders have threatened to go on agitation against the requirement of them having to pay service tax levied on goods transport agencies.

An official release issued by the Finance Ministry said that the Government has taken steps to ensure that traders are generally kept out of the service tax net. "Primarily, the liability to pay the service tax is on the goods transport agencies", the release said.

However, if the consignor or the consignee falls under one of the following seven categories — factory registered under or governed by the Factories Act; or company established by or under the Companies Act; or corporation established by or under any law; or society registered under Societies Registration Act or similar law; or co-operative society established by or under any law; or dealer of excisable goods, registered under the Central Excise Law; or any body corporate established or a partnership firm registered by or under any law — then the person making payment towards freight would be liable to pay the service tax.

Therefore, unless a trader falls under one of the above categories or makes payment of freight when transacting with any one of the seven categories, the trader would not be liable to pay the service tax.

Thus, a trader sending goods to another trader or any entity outside the above seven categories would not be liable to pay service tax, even if the freight is paid by him.

The present dispensation is similar to the method of collection of service tax prescribed in 1997 on goods transport operators. Where a trader is required to pay service tax, full exemption is available when the gross amount charged on all consignments transported in a goods carriage is not more than Rs 1,500 or on an individual consignment is not more than Rs 750.