LEVY ON GOODS TRANSPORT AGENCY:

LEVY ON GOODS TRANSPORT AGENCY: - TOTAL CONFUSION

LEVY ON GOODS TRANSPORT AGENCY: - TOTAL CONFUSION

The recently introduced service tax on “Goods Transport Agency” is creating a lot of confusions. It will be very difficult to implement it in absence of clarification. Otherwise, it will lead to undue litigation. The points of confusion are discussed below: -

Confusion of Responsibility: -The responsibility to pay service tax is on consignor or consignee when they fall in the specified categories. Otherwise, the responsibility shifts on the transport agency. The agency has to write in the consignment note the person liable to pay the service tax. It will be very difficult for the transporter to collect details of payer of freight for each such consignment more particularly when the liability is on the consignee. Suppose an agency books a consignment from Delhi to Hyderabad and the freight is to be paid by the consignee. Then the transport agency sitting in Delhi should know whether the consignee is proprietor or partnership firm so that he can mention in the consignment note about person liable to pay service tax. The agency will like to pay the service tax instead. But the rule does not provide such option to the transport agency. This will give rise to litigation.
Payment of service tax on receipt basis: -The Service Tax Rules provide for the payment of service tax on receipt basis. When the responsibility is on the transport agency to pay service tax, it is very difficult for the agency to pay on such basis. The consignment note is prepared at the place of origin and payment is to be made at the time of delivery by the consignee. The tax is to be paid at the time of receipt of freight from delivery point to the place of origin or at the time of receipt at the delivery point itself. Secondly, the transport agency has to sort out the consignment falling under his responsibility and then to look for its receipt. Thereafter, pay the service tax. It is cumbersome job. The regular account with the parties creates more problems. He has to see which consignment is paid when consignee makes a lump sum payment.

Suppose, a transport agency does not have office at the place of destination then he hand over the goods to other transport agency. Who will pay the service tax? Whether the agency that has raised the consignment note or the agency that has received the payment? In such a situation, payment of service tax at the time of raising of bill itself is simple solution.

The payment of service tax on receipt basis by consignee or consignor is also a problem. The consignor or consignee has to pay the tax when the payment is made to the agency. But it will not be acceptable to the department. They will insist on payment of service tax in the month when the bill is received.

Delivery charges: - Normally a transport agency charges extra delivery charges, loading and unloading expenses from the customer at the time of delivery of goods. These are not included in the consignment note. The service tax liability occurs on the same. But the delivery office will not pay the tax on the same, as they have not raised the consignment note. Secondly, in case change of transport agency, the agency receiving the payment will pay the service tax even though he has not issued the consignment note for such consignment. This needs immediate attention.

Preparation of Consignment Note: -Notification requires that the transport agency should write the goods carriage number in the consignment note. But when the small consignments are received then the agency keeps the goods in godown and put them in the truck when the complete truck load is available. Sometimes it takes weeks altogether to complete a truckload for small consignments. As such it is impossible to mention the vehicle number at the time of booking of consignment note. This condition should be dispensed with.

Sale in Transit: - When a consignment note is booked by the transport agency in name of specified person as consignee then the agency mentions the liability of the consignee in the consignment note. The consignee sales the goods to a non-specified person before these goods reach the destination. This sale is known as Sale-in-transit and approved under the Sales Tax Laws. Who will bear the responsibility of the service tax? The original consignee has not paid the freight and new consignee is not liable to pay the service tax. The Transport agency can not bear the same from his pocket.

Endorsed Bilty: - It is normal practice in textile industry that the goods are delivered unsold to the transport agency. When the goods are sold at the place of destination then the consignment note is endorsed to the consignee. He takes the delivery and pays the freight. Suppose the consignee is a specified person in such sale. In such cases, who will pay the service tax? If the transporter pays the service tax and consignee is a specified person then the department will not accept the same, as the option is not available with the transporter to pay the service tax. But the agency can not forgo the liability, as he does not know the consignee at the time of preparation of consignment note.

Absence of Transport Agency: -The next point of confusion is whether the service tax is payable when the goods carriage owner directly takes the goods from the consignor and no consignment note is issued. No transport agency is involved for this consignment. No service tax will be payable as the tax is on the transport agency only. But this position will endanger the very existence of the transport agencies. In case of full truckload, everyone will prefer the direct delivery because it will extinguish their tax liability.

These all confusion points need immediate attention for smooth implementation of this new levy. In absence of the same, this complicated levy will have the same outcome as earlier had. It will be withdrawn in next budget.

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LEVY ON GOODS TRANSPORT AGENCY: - TOTAL CONFUSION

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