Transport Strike – Service Tax exemption for inputs announced
Yesterday at 7.18 pm, the Ministry of Shipping, Road Transport & Highways in a press release stated,
A final decision relating to exempting all subcontract services under GTA from payment of service tax is also under consideration at the highest level of the Government and a decision in this regard is expected at any time.
At 7.46 pm, the Finance Ministry issued a press release stating that Notification No. 1/2009 – ST had been issued.
The government has reacted to the transporters' strike. The first sop is exemption from service tax to input services used by the Goods Transport Agency. “Supply of goods carriage” is already exempted by Notification No. 29/2008- Service Tax, dated the 29th June, 2008. Now the following services used by a GTA will be exempted from Service Tax.
1. (j) clearing and forwarding agent,
2. (k) manpower recruitment or supply agency,
3. (zr) cargo handling agency,
4. (zza) storage or warehouse keeper,
5. (zzb) business auxiliary service,
6. (zzzf) packaging activity,
7. (zzzq) support services of business or commerce and
8. (zzzzj) supply of tangible goods
Government has realised that as the GTA operators are not allowed CENVAT Credit, they don't get set off of the Service Tax paid on these input services, which amounts to double taxation. But as usual there is a rider – the service provider has to mention the name and address of the ‘goods transport agency' and also the name and date of the consignment note. Is it possible? Suppose a truck is hired to a GTA, how will the owner know the consignment note No. of the GTA?
This GTA service tax has brought in more litigation and strikes than any real revenue. For more than a decade we have been struggling with this tax and every time the government has to bow its mighty head before the transporters. The Finance Ministry which bluntly refuses to consider the plea of the CISF is ready to bend for the transporters. When the Chief Minister of Madhya Pradesh asked for an exemption from Service Tax for repair of roads belonging to the State Government, he was told that such end use based exemptions are difficult to monitor and cannot be given.
Now how is the Department going to monitor whether these exempted services are indeed provided to GTA?
Why don't we abolish this Service Tax on GTA and be done with it?
Notification No Dated: January 05, 2009