Ministry to offer no slack on service tax

The finance ministry has decided to make no concessions on the extension of service tax to goods transport agencies and cable service operators, despite the pressure that has been mounted by these businesses.

Instead, the ministry has decided to form a joint committee with officials from the All India Motor Transport Congress and the Central Board of Excise and Customs to resolve procedural issues relating to the payment of service tax.

Finance Minister P Chidambaram is learnt to have issued instructions that he would not rollback the service tax that has been levied on these sectors. He has also said the committee would commence operations only after an assurance from the transport operators that they would not press for a rollback of the levy.

In the Budget, Chidambaram has introduced a 10 per cent service tax on the goods transport agencies as part of the government's efforts to expand the net of service tax.

The tax has been imposed on the business of transportation and is against the value of the consignment note issued by transport agencies as receipts for the same.

The revenue department has extended the scope of service tax this time to 13 new services, including transport of goods by air, construction services, outdoor catering and forward contract services. In the 2003-04 Budget, the service tax imposed on cable operators was levied at 8 per cent. In the current Budget, the rate has gone up to 10 per cent.

While the finance ministry has clarified earlier that the service tax would be levied on the consignors only and not on the truck owners, the sector feels that the levy would be difficult to implement. The ministry has said that since the consignment notes are issued only by goods transport agencies, the individual truck owners need not be bothered.

For the revenue department, the procedure makes sense as it would not have to chase the thousands of small truck owners and instead, be able to collect the tax at a few large despatch centres only.

In 1999-2000, truck operators had gone on strike protesting the imposition of the tax on the goods operators themselves. The ministry had to rollback the measure in the face of vehment opposition.