Govt Modifies Freight Service Tax Proposal

The Union finance ministry has extended the service tax to transporters by modifying its original proposal, which made truck operators responsible for collecting and remitting the tax.

In the modified format, the onus of remitting the tax has been transferred to the consigner and the consignee, who will pay the five per cent service tax on goods transported by them by road directly to the government. The new tax comes into effect from November 16. Truckers had opposed the tax in its original form and had gone on strike soon after the service tax on goods transported by road was announced by the government in the 1997-98 budget.

The government has also identified the class of companies/organisations and agencies which will attract a service tax when they transport goods by roads. These include any factory established or governed under the Factories Act, 1948; any company established under the Companies Act, 1956; any corporation established by or under any law; any society registered under the Societies Registration Act, 1860, or any other law; or any cooperative society established by or under any law.

Additionally, any dealer of excisable goods registered under the Central Excise Act, 1944, any other body corporate established by or under any other law; and any sales tax payee with turnover exceeding Rs 50 lakh in the previous year will attract the tax. The 5% service tax will be payable on the gross amount, including the freight, but excluding the insurance charge by the transporter for transporting the goods.