The Hindu Business Line : Laghu Udyog threatens stir over service tax on transport agencies

AFTER the nation-wide agitation by the trading community against the introduction of value added tax (VAT) from April 1, fresh trouble seems to be brewing for the Centre on the service tax front.

Laghu Udyog Bharati, a body representing interests of small-scale industries (SSIs), intends to go on a nationwide agitation if the Finance Ministry does not withdraw by February 28 its notification on service tax on goods transport agency services.

The notification, which was issued by the Revenue Department in the first week of December 2004, required SSIs (as consignors or consignees of goods transported by road) to collect and pay service tax on goods transport agency services even though they are not the service providers.

"We do not mind paying the service tax as customers. But we do not want to be held responsible for collecting and making the service tax payments besides getting ourselves registered with Excise Department. It is the service providers who should be made liable to pay the service tax to the exchequer," Mr Balwant Rai Gupta, National President, Laghu Udyog Bharati, told a news conference here.

He said that it was not fair for the Government to place SSIs under "hardship" and require small manufacturers to take on the liability of payment of service tax when they are not the service providers. He wanted the Government to either abolish the service tax or require the service provider to pay the service tax.

Mr Rai highlighted that the Supreme Court had in 1999 in Laghu Udyog Bharati vs Union of India observed that the imposition of tax was always on the person rendering the service who alone could be regarded as an assessee and not the customer.

The issue of service tax on goods transport agency services continued to face hiccups, with both traders and transporters wanting to be kept out of the picture for services rendered by goods transport agencies.

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