By TIOL News Service

NEW DELHI, Mar 8, 2006 : "I may clarify that there is no intention to levy service tax on truck owners or truck operators.” – para 149 of the speech of the FM in the Budget 2004.

The “Find and replace all” technology so useful in the Microsoft Word programme, has landed the government in serious trouble. In this year’s budget for as many as 17 services, the phrase ‘commercial concern’ has been replaced with ‘person’, obviously to scuttle the efforts of some individuals to avoid the tax.

In fact TIOL had in one of the budget run up articles, Is Amitabh Bachan required to pay Service Tax?, commented,

What is the logic behind taxing only commercial concerns? The idea must have been to exempt small time individual service providers when there was no threshold limit for liability to pay Service Tax. Now that there is an exemption limit of four lakhs, perhaps this bar ‘commercial concern’ is not required as this would lead to strange situations where a barber having more than four lakhs turnover will be required to pay Service Tax but a Sachin Tendulkar with a hundred Crores turnover need not pay it.

We had also given the list of services which were taxable only if provided by commercial concerns. While we are proud that the government has listened, it is appalling that the whole exercise was done by a computer operator and not by the Board. The routine replacement of ‘commercial concern’ with ‘person’ has brought a small time truck operator on par with Sachin Tendulkar. While bringing Sachin within the tax net is certainly laudable, treating a truck operator on the same road is a pathetic attempt in socialism. There are many ex jawans and sepoys who own single trucks and who earn their livelihood by doubling up as truck drivers. Now the PC in Pc’s office has made him liable to Service Tax.

This non-application of mind would certainly put the Finance Minister in an embarrassing position if any alert opposition member asks him about his declared intention before Parliament that he does not want to tax truck owners or operators. Did he change his intention and if he did, should he not tell Parliament about his changed stance? Or will he tell Parliament that it was his computer which did the mistake?

After the Finance Minister in his budget speech, 2004 had assured that there was no intention to levy service tax on truck owners or truck operators, a committee headed by Shri S.K. Bhardwaj, Member, Central Board of Excise and Customs, was constituted and the service tax on the Goods Transport Agency service has been brought into effect from 01/01/2005. It should be borne in mind that both the Government as well as the committee have taken utmost care both in framing the Goods Transport Agency definition as well as modalities of collection of tax , so that the Truck Operators or Truck owners are out of the purview of service tax , in line with the assurance given by the Finance Minister to the Parliament in his budget speech ,2004. Following are some of the observations of the Bhardwaj Committee:

RECOMMENDATIONS

1. Scope of levy of service tax on Goods Transport Agency (GTA)

1.1 The Committee observes that as per the provisions of the Finance (No. 2) Act, 2004, any service provided to a customer, by a goods transport agency, in relation to transport of goods by road in a goods carriage is a taxable service and that a goods transport agency means any commercial concern which provides service in relation to transport of goods and issues consignment note, by whatever name it is called. As per the Finance Minister's Budget Speech 2004, there is no intention to levy service tax on truck owners or truck operators.

1.2 For the sake of clarity and for the purposes of implementation of the service tax levy, the Committee recommends the following definitions and principles. The terms used in this report shall be construed accordingly,

(a) Goods Transport Agency:

Any commercial concern which (is common carrier under the Carriers Act, 1865 and) books the goods for transportation by road, issues consignment note and provides value added services over and above the mere carriage of the goods be called the goods booking agency. The Committee is of the view that it can appropriately be called as 'Transporter or Transport Company' and thus, recommends that suitable changes in the nomenclature, in the Act, may be considered at the appropriate time.

TruckOwner :

Any organization/person who possesses the vehicle by virtue of ownership, under lease/hire agreement etc and is responsible only for affecting the carriage of goods and is not required to issue the consignment note. The truck owner can alternatively be called the truck operator also.

What happens in the Finance Bill 2006?

It proposes to replace the word commercial concern with person . As a result of substitution of “commercial concern which” with the words “ person who “ as proposed in the Finance Bill, 2006 the definition of GTA would shape in as follows :

Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by what ever name called.

(the existing definition contains “ commercial concern which “ in the place of “ any person who “ )

Thus the proposal to change the definition obviously is meant to remove the distinction between GTA as firm and GTA as an individual truck operator. One may still argue that the Truck Operator still does not fall in the ambit of GTA definition, as he does not issue any consignment note. But a combined reading of Rule, 4B of Service Tax Rules,1994 read with the definition of Goods Transport Agency would make it clear that issuance of consignment note is mandatory by all persons covered under the definition of Goods Transport Agency. This has been amply made clear by the CBEC in its recent letter to HPCL stating that non-issuance of consignment note can not be taken as a plea for non-application of service tax. Relevant portion of the Board’s letter F.No. 166/02/2005 CX4 (part) dt. 30/01/2006 reads as follows:

“Futher, as per Rule 4B of the Service Tax Rules 1994 “ any GTA which provide service in relation to transport of goods by road in a goods carriage shall issue a consignment not to the customer.”

“Therefore, non obsevance of the said rules is a violation of the said provisions and such a violation cannot be taken to be a basis for non-application of service tax law.”

So the net effect proposed change in the Goods Transport Agency (as mentioned above) appears to be to bring in Truck operator or Truck owners into service tax net through back door.

But the question remains, “what happens to the assurance given by Mr.PC to Parliament in his Budget speech, 2004?”

Most of the truck operators have not studied in Harvard and does not understand the implications of PC’s PC.