F.No.341/18/2004-TRU (Pt.)
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
*****
New Delhi, dated 17th December, 2004
To,
The
Chief Commissioners of Central Excise and Service Tax (ALL)
The
Director Generals (ALL)
The
Commissioners of Central Excise and Service Tax (ALL),
The
Commissioners of Service Tax
Madam/
Sir,
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.
2. 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.
3. 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.
4.3 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:
5.1 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.
5.2 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.
5.3 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.
5.4 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.
5.5 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.
5.6 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.
Yours faithfully,
(R. Sekar)
Joint Secretary (TRU)