Commercial transport operation in the country seems to be heading for a standstill from July 2 onwards as the All India Motor Transport Congress (AIMTC) and the finance ministry are yet to reach an agreement over the issue of evasion of service tax by goods transport agents (GTAs).

In the last few months, the service tax department has slapped tax recovery notices on several GTAs, demanding payment of arrears totalling Rs 400-500 crore.

The AIMTC has declared a nationwide indefinite strike from July 2, with one of its key demands being the withdrawal of the circular issued by the Income-Tax Department on May 16 for the recovery of tax arrears since 2001.

The move by the department came in the wake of serious anomalies noticed by the field officers of the service tax department in their routine audit on the GTA, where they found that these service providers had bracketed cargo-handling, storage and warehousing services as gross freight charges in their consignment note in order to enjoy the benefit of 75 per cent abatement available to them since January 1, 2005.

At present, a service tax rate of 12.5 per cent is applicable on cargo-handling, storage and warehousing services, which has to be deposited by the service provider. On the other hand, for GTA services, there exists a 75 per cent abatement on the freight recovered by the agents from the consignors, which will have to be deposited by the consignor or consignee.

However, AIMTC executives denied these allegations, saying that by levying tax on the other services provided by GTAs and demanding its payment since 2001, the government was violating an earlier agreement reached between them.