NEW LEVY ON GOODS TRANSPORT OPERATOR: ANOMALIES

NEW LEVY ON GOODS TRANSPORT OPERATOR: ANOMALIES

It is truly said, “History repeats itself.” But so early nobody knows. The Government has once again introduced the levy of service tax of Goods Transport Operator on the service taker rather on the transporter. It is once again going on to give rise to protests from the trade and industry as well as undue litigation. The earlier levy in 1997 has seen such scenario. The Apex Court struck down the earlier levy in case of Laghu Udyog Bharti v. Union of India [1999 (84) ECR 53 (SC)]. Later on the Government has introduced a plethora of retrospective amendment to regularize this levy. But the litigation on the above is still continued.

However, we are limited to legal aspects and anomalies on this new levy. These points are discussed below:-

1. Person covered under the new levy:- The lists of the person who are liable to pay the service tax are covered under the Notification No. 35/2004-ST. These gives the exhaustive list of the assessee. However the list clause (g) reads as follows:-

“(g) any body corporate established, or a partnership firm registered, by or under any law, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage.”

The levy on any body corporate or partnership is clear but the words appearing after that are ambiguous. It covers any person or his agent who pays or liable to pay freight. It virtually covers all the persons in its ambit. This seems not to be the real intention of the Government otherwise there was no need to give such exhaustive list. It should amend to clear the confusion.

2. Credit of Input or Capital Goods:- There is a provisions in the Notification No. 32/2004-ST that no credit on inputs or capital goods will be allowed if the assessee intends to enjoy the benefit of abatement. Normally, the transporter to whom the freight is paid owns the vehicle. If the assessee owns these then there is no need to pay the freight. Also, there are hardly any inputs which are used for providing such services. Thus, this clause should be deleted otherwise the Department will insist that the assessee should not take any credit on any inputs or capital goods. This is impossible in case of the manufacturer who is also paying Excise Duty.

3. Cenvat Credit on Service Tax:- The newly introduced Cenvat Credit Rules, 2004 also provides the credit of the input service. The freight is definitely an input service for the manufacturer. Thus, he will thus deposit the tax and take the credit of the same. This is not intended at all. An Exemption Notification like 67/95-CE dated 16.03.1995 should be introduced. It will avoid this revenue neutral exercise wherein the manufacturer will pay service tax and simultaneously take the credit.

4. Cenvat Credit on Service Tax:- There is a provision under Rule 4(7) of Cenvat Credit Rules, 2004 that the credit will be allowed when the payment is made of the value of input service and the service tax paid or payable to the input service provider. But in this case the output service provider himself deposit the service tax. Thus, there should not be condition of payment of the value of input service. The payment of service tax should be condition precedent. The Cenvat Credit Rules should be amended accordingly to enable the output service provider to take the credit as soon as he deposits the tax.

5. SSI Exemption:- It is the demand of the service tax assessee to give an exemption limit to the assessee as available under the Central Excise. It seems that the Government has forwarded a step towards the same. A small scale limit is given for the assessee of Goods Transport Operator. But it is very small limit of Rs. 1500/- only. Secondly, this goods carriage wise. Every assessee has to keep on counting it for each goods carriage. But one goods carriage has availed the Exemption limit with one assessee then how the other assessee will know about it. Whether it is available each assessee wise? Furthermore, it is not clear that it is annually or monthly limit. This point needs urgent clarification from the department.

These amendments are urgently needed for smooth implementation of the levy. But it is bound to face protest from trade and industry.

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NEW LEVY ON GOODS TRANSPORT OPERATOR: ANOMALIES

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