Service tax interpretation continues to be a contentious issue between the road transporters and the Government. Alleging that the Government is adopting a callous attitude towards their demands on service tax and toll rates, the All India Motor Transport Congress (AIMTC) has reiterated its threat of launching a countrywide, indefinite strike from July 2.

Although the Finance Ministry had recently exempted supply of transport vehicles to goods transport agencies (GTA) from service tax, the AIMTC says several service tax are yet to be resolved.

The bone of contention between the two sides is a set of show cause notices issued by the Service Tax Department to some of the GTAs on alleged service tax evasion on account of claiming of abatement benefits on cargo handling, and storage/demurrage charges.

Currently, cargo handling and storage/warehousing services separately attract service tax. Apart from these two, GTA services for transportation of goods by road was also under the service tax net, but had the benefit of 75 per cent abatement on the total amount.

GTA services

The interpretation of which activities constitute GTA services is causing friction between the two sides as abatement facility is available for all GTA services.

Now, the Revenue Department says that service tax will be applicable only on 25 per cent of the total value charged by GTAs towards freight services. However, the AIMTC contends that GTA services should logically cover all services (such as labour/cargo handling, storage/warehousing) offered for road transport.

Since GTAs collect the service tax from the consignor/consignee, it is not practical (on the Governments part) to now claim taxes for past transactions from GTAs, said AIMTC Chairman, Mr Charan Singh Lohara, adding that Government should have raised this issue much earlier.

The Revenue Department contends that the 75 per cent abatement was being enjoyed by GTAs on the total value mentioned on the consignment note which included cargo handling, storage and warehousing charges also. However, Mr Lahara says: Since it is trade practice for GTAs to offer labour/cargo handling and demurrage/storage facilities to consignors, the abatement facility should be on a transporters entire range of services.

Only on freight

The Revenue Departments contention is that service tax collections would get hit if GTAs were to claim abatement on the total amount in the consignment note (bilti). The intent is to provide abatement only on freight charges and not on storage, cargo handling and warehousing services, said Government sources.

In an attempt to resolve the issue, the CBEC top brass had convened a meeting last Thursday. However, the matter remained unresolved even as the Finance Ministry is confident that the procedural glitches can be sorted out.

Payment of service tax by transporters has been a controversial issue for many years, and transporters went on strike in 1997 and 2004 on the issue. The Indian transport industry with more than 48 lakh registered commercial vehicles, gives direct employment to about 2 crore people.

Additionally, AIMTC is looking for relief on highway toll charges and duties on diesel, among others.