Service tax levy on goods transport by road service - reg. - Service Tax - F.No.137/175/2007-CX.4

Service tax levy on goods transport by road service - reg. F.No.137/175/2007-CX.4 Government of India Ministry of Finance Department of Revenue (Central Board of Excise Customs) New Delhi, dated the 27th May, 08 To, The All India Motor Transport Congress, 1/16-A, Asaf Ali Road , New Delhi Sir , Sub:- Service tax levy on goods transport by road service - reg. Please refer to letters No. By-8/ST-FM/049/2008-2009, dated 30-4-2008 and 2.5.2008 seeking clarifications in connection with the levy of service tax on transport of goods by road service (GTA service). These issues have been examined. The issues and clarification thereon are given below. S.No. Issue Clarification 1. In certain cases goods transport agents undertake transport on 'door to door' basis i.e. the goods are lifted from consignors factory or premises and delivered at consignees factory or premises. Whether such activity falls under another taxable service, namely, 'courier service' (not entitled to abatement of 75%, as available in case of GTA service). By definitions, 'courier service' covers transport of time-sensitive documents/goods/article and where a person, either directly or indirectly, carries or accompanies such documents/goods/article Therefore, it is a question of fact whether an activity falls under courier service or GTA service. The distinction is clear from the definitions itself. 2. The department conducts survey/audits on regular basis, causing harassment to the goods transport agents, who are mostly illiterate and un-organized. Audit is conducted to check the level of tax compliance and should normally not cause any harassment to the taxpayer. If there are isolated, cases of harassment, it should of brought to the notice of senior jurisdictional officers. 3. Provisions under notification Nos. 34/2004-ST and 35/2004-ST are ambiguous and need immediate amendments. No specific problem has been brought out a regards these two notifications, which are existence since 2004-05. 4. Sometimes errors/omissions occur in compliance of service tax law due to ignorance/bonafide mistake. In such case o demands for tax or penalty etc. should be issue/imposed unless the same is look in to by an independent ombudsman. Any short payment of tax has to be recovered with interest. However, the officers have been instructed not to issue notices [section 73(3) of the Finance Act 1944] or impose penalties if the taxpayer pays tax and interest and such errors are bonafide mistakes/have reasonable cause [ section 80 of the Finance Act, 1994 ]. Any deviation to these instructions can be brought to the notice of the senior jurisdictional officers. 5. The value added services, like handling, temporary storage, consolidation, packing support, documentations, logistic support or any other service for which payment is made A part of the gross freight by the consignor or the consignee are being subjected to service tax under different services, such as 'cargo handling service', 'storage and warehousing service', even though the same were considered as part of GTA service by the Committee constituted by the Government at the time of bringing into effect the levy of service tax on GTA service. The amendment made in the definition of cargo handling service', in the Budget 2008 has further complicated the issue. The scope of 'GTA service', cargo handling service' and storage and wherehouse service' has been defined explicitly in the Finance Act, 1944. When seen in totality and adopting the principal of harmonious clearly reflect that 'undertaking the responsibility (by way of issuance of consignment note) of road transportation of goods' and activities that occurs during the currency of and in connection with such transportation activity (say booking and delivery of cargo; documentation; logistic support; shifting goods from one vehicle to another transshipment; fragmentation or consolidation of cargo etc., done in transit, the cost of which forms part of the freight charges) would fall under GTA services. On the contrary, an activity undertaken before or after such transportation or an activity that can be undertaken independent of the activity of transportation (even if, in certain cases, done along with transportation, as in case of packing and transportation be movers and packers) such as storing, packing unpacking, loading, unloading of goods before or after they are transported, would not be covered under GTA services, as these are specifically covered under other taxable services. Recovery of the aggregate charges for these different activities under a single invoice/ bill/challan does not necessarily mean that all such charges constitute the gross freight charges'. 6. Sub-contractors like truck owners, brokers, material handlers etc. who are providing service to the goods transport agents (for which the tax has already been made paid under GTA service, being part of the total freight charges) are also being asked to pay service tax by the department. In Budget 2008, GTA service was excluded from 'output service', which means that no credit of any of the service providers to the goods transport agent can be taken. Whether or not a service provided to a goods transport agent is a taxable service or not, would depend on the facts. But if it fails within the definition of any of the taxable services, tax has to be paid by that service provider, irrespective of the fact that the value of the same is included in the total freight charges, which suffers service tax under GTA service. The abatement of 75% allowed in case of GTA service takes such factors into account. 7. One of the recommendations made by the aforementioned Committee was that the field formations would not call for/verify records pertaining to period prior to imposition of service tax levy (i.e. 01.01.2005) unless the same are required in connection with cases booked under central excise or customs laws against the customers (i.e. consignors or consignees ) of the goods transport agents. These instructions are not being followed by the filed formations. As service tax on GTA came into effect from 01.01.2005 there is no question of charging service tax for a GTA service rendered prior to the date. However, as discussed above, in some cases the activities undertaken by goods transport agents or their sub-contractors may fall under any other (other than GTA) taxable service which came into effect prior to 01.01.2005(such as cargo handling service). Such case would not be covered under the instructions, which are issued in respect of GTA service alone. 2. This issues with the approval of Member (Service Tax) Yours faithfully, (Gautam Bhattachraya) Commissioner (ST) Copy to- (1) Director General (Service Tax)- The above clarification may please be communicated to field formations for information and necessary action. (2) J.S, (TRU-II) for information please