New Delhi: The finance ministry will impose a 10.2
per cent service tax on goods transport agencies. This
comes after the 7.7 per cent increase in freight rates
on select bulk commodities announced by the Railways last
week.
The
rate of service tax on goods transport agencies would
be the same as that being charged on other services at
10.2 per cent.
Finance minister P Chidamabram, has confirmed that the
levy would be imposed "very soon" after the
ministry received the necessary clearance from the Law
Ministry for notification.
The
move to bring goods transport agencies under the service
tax net was proposed in the 2004-05 Union Budget, but
was put in abeyance because of stiff resistance from transporters
who went on a nation-wide strike in August.
The
transporter''s main complaint 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 the government setup a six-member committee
under S K Bharadwaj, member, Central Board of Excise and
Customs, to frame an appropriate mechanism for collection
and payment of service tax by goods transport agencies.
The
committee, which recently submitted its report, has suggested
shifting the burden of service tax payment on the consignor/consignee
rather than making the goods transport agency a collecting
agency.
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 which included any factory registered
under the Factories Act, 1948, any company established
under the Companies Act, 1956 and all other organised
sector entities.
According
to the committee, "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 report said.
But
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 has also 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.
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