17th December, 2004
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
Subject : Issues pertaining to levy of service tax on goods transport agency
In the Budget 2004, it was proposed to levy service tax on services provided by a goods transport agency in relation to transport of goods by road.
For this purpose vide Finance (No.2) Act, 2004, a sub-clause (zzp) was inserted in clause 105 of section 65 of the Finance Act, 1994, defining taxable service as any service provided to a customer, by a goods transport agency, in relation to transport of goods by road in a goods carriage.
|2.1||The definitions of “goods carriage” and “goods transport agency” were also provided by inserting clause 50a and 50b in the Finance Act, 1994 as follows:|
(50a) “goods carriage” has the meaning assigned to it in clause (14) of section 2 of the Motor Vehicles Act, 1988; and
|(50b) “goods transport agency” means any commercial concern which provides service in relation to transport of goods by road and issues consignment note, by whatever name called.|
In pursuance to an agreement dated 27th August, 2004 between the Government and representatives of the transport industry, a Committee was set up to look into appropriate mechanism/modalities for collection and payment of service tax. It was instructed vide letter issued from F. No. B2/8/2004-TRU dated 10.9.2004 that no tax would be payable by the goods transport agency till such time the Government comes out with the relevant rules/ notifications prescribing the modalities for levy and collection (refer para 26 of the letter).
|4.||The Committee has submitted its report on 27th October, 2004. Taking into account the recommendations of the Committee, Notification Nos. 32 to 35/2004-Service Tax all dated 3rd December, 2004 have been issued prescribing the modalities for levy and collection of service tax in respect of transport of goods by road. These notifications would be effective from 1st January, 2005.|
|4.1||Notification No. 32/2004-Service Tax, dated 3rd December, 2004 exempts service tax on seventy-five percent of the gross amount charged in respect of taxable service provided by a goods transport agency to a customer, provided that credit of duty paid on inputs or capital goods used for providing such taxable service is not taken and benefit of notification No. 12/2003-Service Tax, dated 20th June, 2003 is not availed of by the goods transport agency.|
|4.2||Notification No. 33/2004-Service Tax, dated 3rd December, 2004 exempts service tax on taxable service provided by the goods transport agency to a customer, in relation to transport of fruits, vegetables, eggs or milk by road in a goods carriage.|
Notification No. 34/2004-Service Tax, dated 3rd December, 2004 exempts the taxable service provided by a goods transport agency to a customer, from the whole of service tax, in such cases where,-
|(i)||the gross amount charged on consignments transported in a goods carriage does not exceed rupees one thousand five hundred; or|
|(ii)||the gross amount charged on an individual consignment transported in a goods carriage does not exceed rupees seven hundred fifty.|
|For the purpose of this notification, “an individual consignment” would mean all goods transported by a goods transport agency by road in a goods carriage for a consignee.|
|4.4||Notification No. 35/2004-Service Tax, dated 3rd December, 2004 prescribes that the person making payment towards freight would be liable to pay the service tax, in case the consignor or the consignee of the goods transported is one of the following,-|
|(i)||Factory registered under or governed by the Factories Act;|
|(ii)||Company established by or under the Companies Act;|
|(iii)||Corporation established by or under any law;|
|(iv)||Society registered under Societies Registration Act or similar law;|
|(v)||Co-operative society established by or under any law;|
|(vi)||Dealer of excisable goods, registered under the Central Excise Law; or|
|(vii)||Any body corporate established, or a partnership firm registered, by or under any law.|
|4.5||In cases other than those mentioned in para 4.4 above, the service tax is to be paid by the Goods Transport Agency. The Goods Transport Agencies are required to issue a consignment note (even in cases covered under para 4.4) other than in cases where the service in relation to transport of goods by road is wholly exempted from service tax. The consignment note should be serially numbered and should contain the names of the consignor and consignee, registration number of the goods carriage used for transport of goods, details of goods transported, place of origin and destination and person liable for paying service tax.|
|5.||To ensure smooth implementation of the levy on the goods transport agency following instructions are issued:|
According to provisions of section 69 of the Finance Act, 1994, requirement of registration is limited to persons liable to pay service tax. Thus those goods transport agencies, which are not liable to pay any service tax, are not required to be registered under the service tax rules.
Permission to goods transport agency for centralized registration under rule 4(3A) of Service Tax Rules, 1994, should not be denied unless there is a substantial reason to believe that it would lead to evasion of service tax. In case of centralized registration, all verification or audit checks should be carried out through registered office only.
No vehicle should be stopped en route for verification of service tax compliance unless there is specific information/ intelligence about deliberate evasion of service tax. Such verification, if carried out, should be under explicit authorization, on case-to-case basis, from an officer not below the rank of a Commissioner. In such cases, the vehicle and the goods should be released immediately after obtaining photocopy of transport documents. Any further verification relating to service tax provisions should be made with the office registered with the Department
In case the central office of a transport company is registered with the department for payment of service tax, no independent enquiries, verification or audit checks should be carried out of the subordinate offices of such goods transport agency, unless it is based on information/ intelligence about deliberate evasion, and such checks/ verification is authorized by an officer not below the rank of a Commissioner. All queries, notices or scrutiny of records, if required, should only be made through the registered office by the departmental offices having jurisdiction over such central office. The registered offices, would however, be subjected to audit checks as per the guidelines of the government.
Records pertaining to the period prior to imposition of service tax levy on the goods transport should not be called for verification unless the same are in connection with cases booked for violation of the provisions of customs or central excise laws against customers of the transporters.
In case of omission in payment of service tax or procedural lapses by persons liable to pay service tax on the goods transport by road, committed before 31st December, 2005, the consequences should be limited to recovery of tax with interest payable thereon. No penalty should be imposed on such defaulters unless the default is on account of deliberate fraud, collusion, suppression of facts or wilful mis-statement or contraventions of the provisions of service tax with intent to evade payment of service tax.
|5.7||If service tax due on transportation of a consignment has been paid or is payable by a person liable to pay service tax, service tax should not be charged for the same amount from any other person, to avoid double taxation.|
Joint Secretary (TRU)