Goods Transport Operator Services – No confusion in the law – but why Mr. P Chidambaram’s army is so confused?

[Surender Gupta]

Why the show cause notices are being issued on the receiver of GTA services denying the benefit of abatement of 75%.

Now a day's service tax department (central excise) is busy in issuing show cause notices to the person availing services of GTA and liable to pay service u/s 68(2) and availing the benefit of abatement equal to 75% under notification no. 34/2004.

Let us have a look on the developments related to Service Tax on Goods Transport Operator Services:-

1 Service Tax on Goods Transport Agencies was introduced initially with effect from 16-11-1997 but was struck down by the Supreme Court as ultravires.

2  After removing the restriction in the statute, the Central Government has once again introduced the service tax on Goods Transport Operator Services with effect from 1-1-2005 by Finance (No. 2) Act, 2004.

3  For this purpose, various notifications and instruction have been issued. (relevant provisions)

4   According to the provisions of Section 68(2) and Rule 2(1)(d) of the Service Tax Rules, 1994, the liability of service tax shifts to the recipient of services (consignee or consignor) if they are among the specified persons.

5 On the other side, notification no. 32/2004 ST dated 3-12-2004 has been issued to exempt 75% (abatement) of the value of services where the goods transport operator does not avail the benefit of Cenvat Credit. (Now the notification no. 1/2006 ST dated 1-3-2006 - Sr. no .6)

6  Now, a pertinent question has been arisen that whether the specified persons (i.e. Consignor or consignee) are also eligible for availing the abatement of 75%.

7 Since there is no restriction in the notification and on the basis of principle of equality it was found that the specified persons are also eligible for such exemption.

8 On the contrary, the Director General of Service Tax (DGST) has issued an instruction dated 30-3-2005 to the service tax department for not allowing the benefit of 75% abatement to the specified person (i.e. consignor or consignee).

9  But, the DGST has found the above instruction wrong and has withdrawn the same vide its letter dated 4-11-2005. But such letter was not been circulated publicly, DGST has issued another letter dated 3-4-2006 confirming that the earlier instructions dated 30-3-2005 had been withdrawn.

10  Further, the TRU, in its letter F. No. B 1 /6 /2005 TRU dated 27-7-2005 - Paragraph no. 31,  has confirmed that the benefit of abatement of 75% is available to the specified persons (consignee or consignors)

From the above discussions, it is very much clear that the consignee or consigner who is liable to pay service tax on GTO services are eligible for abatement of 75% than why the officer of central excise department are so confused and continue to issue show cause notices to the persons availing benefit of 75%.

Do you need any other example of harassment?