Transporters' service tax collection norms set

In a move that could once again prove to be explosive, Centre has approved the process of levying service tax on the transport sector. The service tax will come into effect from January 1, 2005, according to a notification issued by the Finance ministry on December 3, 2004.

Earlier, the ministry had appointed a committee to determine modalities of levying tax on the transport sector. The report submitted by the committee has been accepted in full by the government.

As per the notification, in case the consignor or the consignee is in the organised sector, the burden of tax payment would be shifted to such persons paying freight charges and the same would be collected directly from them. Which means that the tax burden will always remain with the party from the organised sector irrespective of who pays the freight charges.

In such cases, the liability to pay service tax would not be on the goods transporting agency but on the consignor/ consignee. As for transportation of goods not involving the organised sector, the liability to collect and deposit service tax would be on the goods transport agency.

Persons liable to pay service tax need to get themselves registered with the jurisdictional authorities. If a transport agency, transports goods of or for the organised sector only, it need not get itself registered with the Central Excise and Customs department "" the government department that collects service tax revenue.

In case the goods transport agency has a central office, it can register itself through that office. Instructions have been issued to the department to allow such registration, said sources in the Finance ministry.

The department has also been instructed that unless there is intelligence about deliberate evasion of service tax, no vehicle should be stopped enroute for verification of service tax compliance.

Such verification, if at all carried out, should be under explicit authorisation, on case to case basis, from an officer not below the rank of a commissioner. Even in such cases, the vehicle and the goods should be released immediately after obtaining photocopy of transport documents.

Further verification of service tax compliance should be made with the central office of the goods transport agency. Similar restrictions have been recommended for checks at branch offices of the transport agencies. The registered offices would, however, be subjected to audit checks as per the guidelines of the government, as per the new rules.

The service tax authorities have not been empowered to verify records pertaining to the period prior to the imposition of service tax levy on goods transport, unless the same are in connection with cases booked under the Customs or Central Excise laws against some customers of the transporters.

Whosoever is liable to pay service tax on transport of goods by roads, would be allowed abatement towards items such as fuel, spare parts, toll taxes, local taxes etc, the committee had opined.

An abatement of 75 per cent on gross freight amount has been given. The abatement would, however, be subject to condition of non-availment of Cenvat credit on input goods and capital goods, and non-availment of exemption to goods sold during the course of provision of service etc. The credit of taxable services would, however, be available to the assessee claiming such abatement.

Certain cases have been exempted from service tax on transport sector. 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. Further consignments of fruits, vegetables, eggs, milk, and sand without any value limit, have also been exempted. These exemptions would, however, not apply to the organised sector.