Service Tax - GTA - Toll Charges - whether includible in value of taxable services - IOCL gets Rs. 5 Crores Notice from DGCEI
AS is well known, the Service Tax in respect of GTA service in most cases is to be paid by the consignor or consignee. Apart from the charges collected by the transporter for transporting goods, most often, the other road charges are to be reimbursed to the transporter. These days there are not many potholes on our National Highways, but they are full of toll gates, which collect hefty toll charges for using the high-speed roads. Now, the transporter would expect the consignor/consignee to reimburse the toll charges and most often, they do.
Now, the question is whether these charges are includible in the value of taxable services of GTA.
Let us take a sample case:
Recently the DGCEI noticed that IOCL has not been discharging their Service Tax liability properly as Goods Transport Agency by not including toll charges paid to the transporters as actual expenses in the taxable value for the purpose of payment of Service Tax during the period from October '2008 to September '2013. The amount of Service Tax payable worked out to Rs. 4,64,97,752/-
DGCEI noted that all amounts paid to transporters by customers shall be the part of gross value of service received and in order to compensate the components of in transit costs, viz. toll charges, etc. an abatement of 75% is provided.
DGCEI noted that:
Indian Oil Corporation Ltd is receiving the service of Goods Transport Agency defined under the terms of erstwhile Section 65 (54b) of the Finance Act, 1994, as amended, (now covered under Section 65 (26) of the Finance Act, 1994, as amended w.e.f. 1.7.2012) read with erstwhile Section 66 now Section 66B of the Act, ibid.
These services were taxable in terms of erstwhile Section 65(105) (zzp) Chapter V of the Finance Act,1994 (now Section 66 D(p) of the Act, ibid.). Being a recipient of these taxable services, Indian Oil Corporation Ltd is liable to pay Service Tax themselves, being covered by the provisions of Rule 2(1)(d)(v) of the Service Tax Rules, 1994. The service provider, that is the transporters involved in the instant case, are plying their trucks/goods carriage on various routes for transporting the goods of M/s Indian Oil Corporation Ltd. There are certain roads/bridges where toll charges/fees are levied and collected from the trucks/ commercial vehicles plying over those roads/bridges. Without payment of the impugned toll charges/fees, the goods carriage cannot cross/use the said road/bridge and hence, the transporter cannot provide the impugned services of Goods Transport Agency, without paying toll charges/fees. Hence, the expenditure incurred by the transporter becomes intrinsic part of the cost of transportation, as without incurring the expenditure on toll charges/fees, the provision of service of Goods Transport Agency is impossible on the route. Hence, the toll charges/fees, cannot be disintegrated from the value of taxable services of Goods Transport Agency as they are inextricably connected with the service provided. This expenditure on account of toll charges/fees is indispensable and inevitably incurred to provide taxable service and hence, essentially forms part of value of taxable service. As per information, these toll charges/fees have been later on charged/ recovered by the transporters from Indian Oil Corporation Ltd. Such expenditure incurred by the transporters and charged from Indian Oil Corporation Ltd form an intrinsic part of value of taxable service, in terms of Section 67 of the Finance Act, 1994 .
DGCEI alleges that:
From October '2008 to September '2013 IOCL have short paid Service Tax on goods transport agency by not including the toll charges in the taxable value for the purpose of payment of Service Tax amounting to Rs. 4,64,97,752/-. They have not disclosed these facts in the ST-3 Returns filed with the department and never informed to the department that they are reimbursing certain amount to transporters without including the same in the gross value of services received by them and therefore, they have suppressed the said fact from the knowledge of the department with intent to evade payment of Service Tax. Therefore, the extended period under the provisions of Section 73 of the Finance Act, 1994 is invokable in this case .
So, IOCL is with a Show Cause Notice demanding about Rs. 5 Crores with penalties and interest. [TIOL is in possession of a copy of the Show Cause Notice]
Now this is applicable to every transport of goods by road. There is hardly any road without a tollgate and there is hardly any assessee who includes toll charges in his value for payment of Service Tax on GTA. So every assessee is an offender. Maybe the Government should exempt the toll charges from the taxable value for GTA.