The Hindu Business Line : Service tax payment — Panel favours lesser burden on transport agencies

THE six-member committee set up by the Government to frame an appropriate mechanism for collection and payment of service tax by the goods transport agency has suggested shifting the burden of service tax payment on to the persons (consignor or consignee) paying the freight charges and collecting the tax directly from them without making the goods transport agency a collecting agency.

The panel has divided the consignor/consignee into two broad categories - those belonging to the organised sector and those in the unorganised sector.

In the case of transport of goods by road, where the consignor or the consignee bearing the freight is in the organised sector, the liability to pay service tax should not be on the goods transport agency but on the persons making payment towards freight charges.

This covers any factory registered under or governed by the Factories Act, 1948, any company established by or under the Companies Act, 1956, or any corporation established by or under any law. It also includes any society registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India, any co-operative society established by or under any law, any dealer of excisable goods who is registered under the Central Excise Act 1944 or the rules made there under, and any body corporate established by or a partnership firm registered by or under any law.

"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 said in its report.

Besides, since such consignor/consignee is in the organised sector, the level of tax compliance is also expected to be high.

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

The panel, which finalised and submitted the report on October 27, has also recommended an abatement of 75 per cent on the gross freight amount charged to those who are liable to pay service tax on transport of goods by road. In other words, service tax will be levied at the rate of 10.2 per cent only on 25 per cent of the gross freight amount charged by the goods transport agency. The abatement would, however, be subject to certain conditions.

Further, the committee has suggested that in certain cases, service provided by the goods transport agency may be exempted from service tax. These include 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 consignment does not exceed Rs 750. Also, any consignment of fruits, vegetables, eggs, milk and sand (without any value limit) should be kept out of the service tax levy, it said. Such exemption, would not apply in cases where the liability to pay service tax is on the consignor/consignee.

The committee, headed by Mr S.K. Bhardwaj, member, Central Board of Excise and Customs, has also recommended that the issuance of consignment note be made mandatory for booking of material for transportation by road under the Carriers Act, 1865.

As per the report, the levy of service tax on the goods transport agency will be confined to those commercial concerns which book goods for transportation by road, issues consignment note and provides value-added services. These include truck brokers and booking/delivery agents.

"It is up to the Government now to accept the recommendations of the committee and notify the rules and regulations for levy of service tax on goods transport agency," said Mr J.M. Saxena, Secretary General, All India Motor Transport Congress.