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Cos may get respite from paying service tax on goods transport
July, 24th 2006

Companies paying service tax on goods transport agency services may finally be allowed to avail themselves of abatement on such services.

The issue of abatement on goods transport agency services has been mired in legal tangle over the last one year.

The Finance Ministry now plans to convince the Comptroller and Auditor-General (CAG) that companies should be allowed to avail themselves of abatement so long as they have not claimed Cenvat credit on the inputs or capital goods used for such services.

The CAG had raised audit objections over the issue of companies availing themselves of abatement on such services. It had said that such entities were consignors or consignees and not the service providers in the case of goods transport agency services.

"We hope to convince the CAG that abatement should be allowed so long as the condition that Cenvat credit on inputs has not been availed is fulfilled by companies," a senior Finance Ministry official said.

Although companies are not the service providers, they are liable to cough up service tax on goods transport agency services if they are either a consignor or a consignee of goods transported by road.

In December 2004 the Government had announced the availability of 75 per cent abatement for such services. The abatement was being allowed towards fuel, spare parts, toll taxes, and local taxes incurred by the transport sector.

However, on March 30 last year the Director-General of Service Tax (DGST) issued a letter to clarify that the benefit of abatement would not be available in cases where the persons other than the service provider were liable to pay service tax on goods.

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