TRU INSTRUCTIONS ON GOODS TRANSPORT, BUT NO CLARIFY ON HOW TO TAKE CREDIT
THE TRU has come out with elaborate clarification on Service Tax on Goods Transport Agency to be effective from 1st January. 2005. The first four paragraphs of the circular reproduces the statutory provisions like:
1. Exemption for tax on 75% of the value provided that no credit is taken and no exemption under 12/2003-SERVICE TAX dated 20-6-2003 is availed.(This notification is a rather flawed one - please see "correct Notification No. 12/2003" in this edition of DDT.)
2. Consignment Note Required Even If No Service Tax Paid: The TRU letter clarifies that Goods Transport Agencies are required to issue consignment Notes even when they are not liable to pay Service Tax. i.e. when the Service Tax is paid by the consigner or by Consignee
3. Not Required To Register, When Not Liable To Pay Service Tax. Goods transport Agencies who are not liable to pay Service Tax are not required to register with the department.
4. Centralised Registration not to be denied. As per Rule 4(3)(a) of Service Tax Rules, Commissioners may permit Centralised Registration in case of goods transport agencies Centralised Registration should not be denied, unless there is reason to believe the evasion of tax. Verification and Audit checks will be carried out only at Centralised office. No independent enquiries or audit checks will be conducted on the branch offices, except with the authorisation from an officer of the rank of Commissioner or above.
5. No vehicle will be stopped on the way unless there is specific intelligence about deliberate evasion and even then only with the permission of the Commissioner or above. In such cases also the vehicle and goods will be released after taking Photostat copy of the transport documents. This is exactly what the Bharadwaj Committee had recommended and an obliging Board gladly accepted. But neither the Bharadwaj Committee nor the Board had taken the trouble of checking up whether any officer had the power to stop and search a vehicle under Service Tax Law. - (See can a vehicle be stopped under Service Tax? in this edition of DDT)
6. NO PREVIOUS RECORDS : Records pertaining to the period prior to the imposition of Service Tax will not be called for verification and except in the cases of offences under Customs & Central Excise.
7. ALL MINOR OMISSIONS EXCUSED TILL 31-12-2005: No penalty for omission in payment of tax or procedural lapses for one whole year till 31-12-2005 except in the cases of deliberate fraud, collusion etc.
8. NO DOUBLE TAX: If the tax has already been paid, it will not be charged again from any other person to avoid double taxation.
See TRU letter in F.No.341/18/2004-TRU (Pt.) dated 17th December, 2004
2. But how to take credit?
The recent notifications and the very latest TRU letter has left a very important omission. There is now no document prescribed for taking credit of the Service Tax paid by a consignor or consignee in case of goods transport by Road. Rule 9 of the Cenvat Credit Rules, prescribes the documents under which cenvat credit can be taken. Rule 9(1)(e) deals with the challan evidencing payment of tax by a person who is liable to pay the Service Tax but who is not the Service Provider covered under Rule 2(1)(d)(iii) &((iv) 0f the Service Tax Rules. These clauses make the insurance company in case of service provided by insurance agent and the Indian recipient in the case of service provided non residents, as liable to pay tax. A clause(v) has been added to this Rule 2(1)(d) of the Service Tax Rules to make the consignor or the consignee liable to pay the Service Tax in certain cases. But this clause(v) has not been added to Rule 9(1)(e) of the Cenvat Credit Rules, 2004. So the net result is - now there is no document prescribed to take credit of tax paid by the consignor or consignee in the case of goods transport. So much for the elaborate work done by the Board! Thankfully, we still have time. The tax is to be effective from 1.1.2005 (This also by TRU's dictum, not any law) and the credit can be taken only after that. So the government can still amend the Rule 9 of the Cenvat Credit Rules. DDT hopes it will be done before the New Year.
3. correct Notification No. 12/2003
This notification actually is meant to exempt the tax on the value of the goods and materials supplied along with the service for calculation of Service Tax. This is the notification which applies to all services but unfortunately is one of the most defectively drafted notifications. To elaborate, the notification "Exempts so much of the value of all taxable services as is equal to the value of the goods and materials sold by the service provider from the service tax leviable thereon." Let us understand this with an example:
1. Gross receipts Rs. 100
2. value of goods and materials supplied Rs. 80
3. value of service Rs. 20
4. Service Tax on gross receipts- 10.2% of 100 Rs. 10.20
5. Service Tax on goods supplied - 10.2% of 80 Rs. 8.16
6. Service Tax on service 10.2% of 20 Rs. 2.04
Now what the Government actually wanted to collect was only Rs. 2.04, by exempting Rs. 8.16 but what it actually exempted is the value of goods and materials, Sl.No 2 above. So as per this notification, the tax payable would be 10.20 minus 80!. An impossible situation ? And this notification is in the statute for the last 18 months, blissfully ignorant that it cannot be implemented. Compare this with the recent Notification No.32/2004 granting 75% exemption, where the wording is "Exempts from so much of Service Tax……. as is in excess of the Service Tax calculated on a value which is equivalent to the 25% of the gross amount.
Notification No.12/2003 is prima-facie defective, for the reason that what it exempts is the value and not the tax. As per Sec.93 of Finance 1994, the Govt has power to exempt the tax but not the value. Will the Board rectify this?
4. can a vehicle be stopped under Service Tax?
Rule 23 of Central Excise Rules gives the power to Central Excise officers to stop and search a vehicle. There is no similar provision for Service Tax. However, as per Sec. 83 of Finance Act, 1994, Sec.12 of the Central Excise Act is applicable to Service Tax. As per Sec.12 of the Central Excise Act, certain provision of the Customs Act, notified by the Government are applicable to Central Excise. As per Notification No.68/63-Central Excise dated 4-5-63 issued under Sec.12, certain provisions of Customs Act, are made applicable to Central Excise. Sec.106 of Customs Act gives power to the proper officer to stop and search vehicles. But this Sec.106 is not included in Notfication. No.68/63 and therefore, the obvious conclusion is there is no provision under the law relating to Service Tax to stop and search a vehicle. The TRU circular on Goods Transport referred in the beginning of this edition of DDT, bars stopping vehicles except with the permission of the Commissioner, but Board seems to be unaware of the fact that Commissioner has no such power- to stop a vehicle or to authorise for its stopping. For that matter, even the Board does not have the power. The Government is very kind in not exercising the power it does not have.
5. Foreign Trade Policy
Government amends Appendix 3 to Schedule 2 (Export Policy) of the ITC(HS) Classification of Export and Import Items, 2004-2009 to add some more items to the list.
Appendix 3 lists special chemicals, organisms, materials, equipment and technology(SCOMET) allowed to be exported against export licences. Now the following items are added to the list.
3 D 004: Equipment related to P3, P4 facilities such as protective suits and class III safety cabinets.
3 D 005: Complete containment facilities at P3, P4, containment level as specified in the WHO biosafety manual.
And at present "Micro-light Aircraft and powered hang-gliders" figure in the list. This has been amended to include the parts of these aircraft and gliders.
See DGFT NOTIFICATION NO 11 (RE-2004)/2004-2009, Dated: 16, 2004
DGFT amends Handbook of Procedures to amend Appendix 27 and para 4.7
Appendix 27 lists the export promotion councils. In the list sl.no. 26 in respect of Shellac Export Promotion Council is kept in abeyance.
Para 4.7 deals with issue of advance licence where SIONs are nor fixed, based on self declaration. Now the following words are added to this para. For export of perfumes, perfumery compounds and various feed ingredients containing vitamins, no licence shall be issued under Para 4.7 by the licensing authority and the applicants may apply under Para 4.4.2 of handbook of Procedures, Vol-I. Where export and/or import of biotechnology items are involved, licence under Para 4.7 shall be issued by the licensing authority only on submission of a 'No Objection Certificate' from the Department of Biotechnology."