Service Tax on Goods Transport Agency

The Finance Act of 2004 has imposed the levy of service tax on the goods transporters w.e.f 10-09-2004. Any commercial company which deals in services pertaining to transport of goods by road and issues consignment note is known as a goods transport agency, as stated in section 65 (50b) of the Finance Act of 1994.

As mentioned in the Finance Act of 1994, a goods transport service provider must be a commercial concern. The legislature have mentioned the term “any commercial concern” in place of “any person” because an individual falls outside the scope of the service provider. The taxability of specified services is imposed on the commercial concern but whether the concern deals with such specified services, is not a mandatory requirement.

The legislature never mentions in his definitions that by putting a signboard, an individual will be treated as a commercial concern. By putting a signboard mentioning the name of the trader, address or location of the trader and the nature of the trade does not transform an individual into commercial concern. An individual business can never be transformed into a commercial concern just on the basis of its location, title or on account of the quantum of business.

The term “commercial concern” is composed of two words – “concern”, it is associated with the term “commerce”. It implies that the company is registered under the Companies Act, 1956, section 25. Concerns like educational institutions, religious or charitable trusts cannot be termed as commercial concerns because these are non-profit organizations. And in a concern, there is a requirement of more than one beneficiary.

Any service provided to a customer by a goods transport agency is considered to be taxable, if it includes transportation of goods by road in goods carriage – Finance Act 1994, section 65 (105).

Motor Vehicle Act of 1988, defines the term “Goods carriage” as any vehicle which is used for the sole purpose of carrying goods from one place to another.

The term “motor vehicle” is defined as any mechanically propelled vehicle used on roads for transporting people or goods or any vehicle which does not run on rails or have less than four wheels with an engine capacity of not more than twenty five cubic centimeters – Motor Vehicles Act, 1988, section 2 (28).

Value of Taxable Service:

The value of taxable service shall be the gross amount charged by the service provider for providing such service and the money value of any other consideration ( if any) received for providing such service. The value of taxable service shall be determined as per the provisions made under section 67 of the Finance Act, read with Service Tax (Determination of Value ) Rules, 2006. See service tax rates also. Know how to e-file of service tax return step by step?

Who is responsible to pay Service Tax:

The service provider is responsible for payment of Service Tax. (Section 68 of Finance Act, 1994). However, in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,

(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b) any company established by or under the Companies Act, 1956 (1 of 1956);

(c) any corporation established by or under any law;

(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e) any co-operative society established by or under any law;

(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; or

(g) any body corporate established, or a partnership firm registered, by or under any law, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;”

Exemption on certain specified services provided to a goods transport agency– Notification 1/2009 ST dated 05.01.2009

Certain specified taxable services provided to goods transport agency for its use in relation to transport of goods by road service provided by it to its customer, have been exempted from service tax. These are – clearing and forwarding agent’s services, cargo handling agency service, manpower recruitment service, storage and warehousing service, business auxiliary service, packaging service, support service of business or commerce, supply of tangible goods service. This has been retrospectively made applicable from 2005 in Finance Act 2009.

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