Tax on transport agencies to stay

Committee to resolve procedural issues relating to service tax payment.

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

Instead it has decided to form a joint committee with officials from the All India Motor Transport Congress and 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 roll back the service tax that has been levied on these sectors.

He has also said that the committee would commence operations, only after an assurance from the transport operators that they would not press for a roll back of the levy.

In Budget 2004-05, 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.

Service tax has been imposed on cable operators in budget for 2003-04 at 8 per cent. The rate has now gone up to 10 in the current budget.

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 few large despatch centres only.

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