LEGISLATIVE HISTORY
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The service of ‘Transport of Goods by Road’ was
brought into the service tax net for the first time
with effect from 16.11.1997 as the service provider
was designated as “goods transport operator” i.e.
any commercial concern engaged in the
transportation of goods other than a courier agency.
It was also provided under the sub-rule 2(1)(d) that,
in relation to service provided by a goods transport
operator, every person who pays or is liable to pay
the freight either himself or through his agent was
made responsible for collecting the service tax and
remitting the same to Government.
The levy remained in force only from 16.11.1997 to
1.6.1998.
SUPREME COURT
STRIKES DOWN THE LEVY
OF
SERVICE TAX
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On 27.7.1999 in the case of Laghu Udyog Bharati vs.
Union of India (2006) 4 STT 322, the Supreme Court
struck down the sub-rule 2(1)(d) under which the
service receiver was made liable to collect and pay
service tax.
The Govt however validated it through the insertion of
Section 116 and 117 of the Finance Act, 2000 and
Section 158 of the Finance Act, 2003.
Fresh procedure was prescribed to pay the tax due for
the period 16.11.1997 to 1.6.1998
REVIVAL OF THE LEVY OF TAX ON
SERVICE OF
TRANSPORT OF GOODS BY ROAD
Budget
proposals for the financial year 2004-05
incorporated proposal for service tax on ‘goods
transport agency’ instead of the ‘goods transport
operator’.
The actual levy of tax was put on hold through an
executive instruction dated 10.9.2004.
Committee has been set up to look into appropriate
mechanism/modalities for collection and payment of
service tax by commercial concerns as ‘goods
transport agency’.
Notification has been issued in December 2004, so
as to make the levy effective from 1.1.2005
TAXABLE CATAGORIES OF
TRANSPORT SERVICES
The tax on services of 1. transport of goods by Air Service
U/s 65 (105) (zzn),
2. transport of goods in containers by Rail Service
U/s 65 (105) (zzzp)
3. transport of goods, other than water through
Pipeline or other Conduit
U/s 65 (105) (zzz)
has also been introduced in addition to
taxable service of ‘transport of goods by road’
to which we are confining the present discussion.
TAXABLE SERVICE OF TRANSPORT
OF GOODS BY ROAD
The ingredients spelt out in the definition are
as follows :1. The service is provided or is to be provided
to a customer
2. The service must be in relation to carriage
of goods.
3. The carriage of goods must be by road.
4. The goods must be carried in a goods
carriage
WHAT IS A
‘GOOD TRANSPORT AGENCY’ ?
“means any person who provides
service in relation to transport of
goods by road and issues
consignment note, by whatever
name called;”
After 1.5.2006 ‘any person’ providing service as a Goods
Transport Agency is liable to Service Tax earlier the
words used were ‘Commercial Concern’.
The word ‘Person’ when generally used without any
qualification means not only a natural person, but also
a juristic or artifical person.
MEANING OF ‘CONSIGNMENT NOTE’ AND ISSUING
OF ‘CONSIGNMENT NOTE’ MADE MANDATORY
‘When a person deposits the goods with any
transporter for the purpose of transport to a given
destination, the transporter issues the lorry receipt
or consignment note to the person depositing the
goods’.
Under Rule 4B from 1.1.2005 it is mandatory to issue a serially numbered
consignment note containing the prescribed particulars: The name of the consignor and consignee
 Registration number of the goods carriage in which the goods are
transported
 Details of the goods transported
 Person liable for paying service tax, whether consignor, consignee or the
goods transport agency.
No specific form has been prescribed for the purpose of issuing consignment
note.
MEANING OF ‘GOODS’
Under Section 65(50) of the Act the word ‘Goods’ has
the same meaning assigned to it in clause (7) of
Section 2 of the Sale of Goods Act, 1930-
“goods’ means every kind of movable property other
than actionable claims and money; and includes
stock and shares, growing crops, grass, and things
attached to or forming part of the land which are
agreed to be served before sale or under the
contract of sale”.
WHAT IS THE MEANING OF
‘GOODS CARRIAGE’ ?
The medium of transport must be a ‘goods carriage’
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“Goods carriage” has the meaning assigned to it in
clause (14) of Section 2 of the Motor Vehicles Act,
1988”
As per Section 2(14) of the Motor Vehicle Act, 1988,
“goods carriage” means
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“Any motor vehicle constructed or adapted for use
solely for the carriage of goods or any motor vehicle
not so constructed or adapted when used for carriage
of goods”.
The word ‘motor vehicle’ will cover all the mechanically
propelled vehicles like trucks, light carriage vehicles,
trailers, cars etc
SERVICES NOT TAXABLE
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Goods transport agency accepting goods from
other goods transport agency – If the goods
transport agency accepts goods for carriage
from other goods transport agency then he will
not be liable for service tax as the other goods
transporter agency is not a customer.
Carriage of goods on animals, human being,
hand carts, or bullock carts, etc, which does
not involve use of motor vehicle is excluded as
they are not covered under the definition of
‘goods carriage’.
EXEMPTION TO THE EXTANT OF
75 PERCENT ON VALUE OF
TAXABLE SERVICE
Only 25 percent of the freight paid will be subjected to
service tax at the prescribed rate.
The exemption will not be available if the goods
transport agency has:1.
taken Cenvat credit of duty on input or capital goods
used for providing taxable services, or
2.
taken Cenvat Credit of service tax on input services
used for providing taxable service, or
3.
availed exemption on cost of goods and materials
sold to the recipient of the service, in terms of
Notification No. 12/2003-ST, dated 20.6.2003
CONSIGNORS/CONSIGNEES CAN
AVAIL THE 75% ABATEMENT
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Consignors/Consignees can pay tax only on
25% of the ‘value of taxable service’.
Subject to the condition that the ‘goods
transport agency’ had fulfilled the conditions
prescribed in the Notification No. 12/2003 ST
dated 20.6.2003.
Obtain a declaration from the ‘goods transport
agency’ to the effect that such agency have not
availed Cenvat benefit or benefit of Notification
No. 12/2003
VALUE-BASED EXEMPTION ON
CONSIGNMENTS
Notification No. 34/2004-S.T. dated 3.12.2004 grants
full exemption from tax in the following two situations:1.
where the gross amount charged on all
consignments transported in a goods carriage does
not exceed Rs. 1,500.
2.
where the gross amount charged on an ‘individual
consignment’ transported in a good carriage does
not exceed Rs. 750.
An ‘individual consignment’ for the purpose of (b)
above means all goods transported in a goods
carriage for a consignee.
CERTAIN SPECIFIED PERSONS MADE
RESPONSIBLE FOR PAYING
SERVICE TAX
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As per the provisions of Sec 68 (2) the liability
to pay service tax in the case of service of
transport of goods by road has been shifted to
the service receiver or other specified person.
The person i.e. consignor or the consignee
making payment of freight to the taxable
service provider, is responsible for payment of
service tax to the Government Account.
ISSUANCE OF INVOICES, BILLS,
CHALLANS
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Taxable service provider required to issue invoice, bill or challan
within 14 days from either the date of completion of provision of
service or receipt of any service charges whichever is earlier.
Such document should be serially numbered and should contain
the name, address of the service provider and the service
receiver as well as description, classification and value of service
provided and service tax payable thereon.
To avail CENVAT credit by the recipient of taxable service, the
amount of ‘education cess' and ‘secondary and higher education
cess' should be shown separately on the invoice.
STC no./ Registration no. of the service provider should also be
mentioned on the invoice.
Document must also contain the consignment note number, date
and gross weight of the consignment.
ISSUANCE OF
CONSIGNMENT NOTES
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Rule 4B of the Rules prescribes that the goods
transport agency shall issue a ‘consignment
note’.
Consignment Note should be serially numbered
and would contain the names of the consignor
and consignee, the vehicle registration number,
details of goods transported, details of place of
origin and destination, and the person i.e.
consignor / consignee/ goods transport agency
liable to pay service tax.
PROCEDURAL RELAXATIONS
CONSIGNMENT NOTES
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In case of small cargo, where the goods transport
agent is not aware of the vehicle registration number
at the time when he receives the goods and issues
consignment note, he may mention the nonavailability of vehicle registration number on the copy
issued to the consignor & the same may be noted
afterwards, he should mention the number
consignment note-wise, in the records.
In trans-shipment of goods en-route, the records of
registration numbers of the vehicles carrying such
goods under a consignment note must be recorded
as soon as the said information is available to the
goods transport agent.
RESPONSIBILITIES OF THE GOODS
TRANSPORT AGENCY
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1.
2.
Mandatory to issue a consignment note under Rule 4-B and
also an invoice, bill/Challan under Rule 4-A in respect of
consignment on which service tax is payable.
The sole responsibility for availing exemptions correctly, and for
determining the value of the taxable service and the service tax
payable is on the goods transport agency.
For payment of service tax, concession has been allowed to the
goods transport agency:Where the consignor and the consignee are both non-specified
persons (like individual, HUF etc), the responsibility for
collection and payment of service tax to Government account
rests with the goods transport agency.
Where either the consignor or the consignee, or both of them,
is a specified persons under sub-clause (v) of Rule 2(1)(d), the
agency need not collect service tax from the consignor and,
consequently, has no responsibility to remit the service tax.
RESPONSIBILITIES OF THE
CONSIGNOR & CONSIGNEE
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All specified persons must get themselves registered under
the Service Tax Provisions.
If the specified person is the consignor, it must ensure to
receive the consignment note and invoice from the goods
transport agency. It need not pay the service tax due to the
goods transport agency.
If the consignor is liable to pay freight, it must directly remit
the service tax due to Government account. This can be done
either on monthly basis or quarterly basis, as per Rule 6(1) of
the Service Tax Rules.
If the consignee is liable to pay freight, the consignment note /
invoice will still be handed over to the consignor only by the
goods transport agency. It will be the responsibility of the
consignor to transmit the documents to the consignee. The
consignee shall then directly pay the tax due to Government
account.
I sincerely acknowledge the guidance and
feedback received from my colleagues
specially
Mr. Naveen Garg, Chartered Accountant
&
Mr. Arvind Sharma, Advocate.
R-13/24, RAJ NAGAR,
OPP. A.L.T.C., GHAZIABAD
PH: 0120-2820380,
2821407