Whether Individual Truck owner is Goods Transport Agency

Introduction

Section 66D of the Finance Act, 1994 (hereinafter referred to as 'Finance Act') enlists the services falling under the negative list which are out of the ambit of chargeability of Service Tax. Services by way of transportation of goods by road is one such service which falls under the Negative List [Section 66D(p)(i)] on which Service Tax is not leviable. However, services provided by a Goods Transport Agency (GTA) or by a Courier Agency in relation to transportation of goods by road is excluded from the negative list which means the services provided by a GTA is not excluded from the purview of Service Tax and is chargeable to Service Tax.

Interestingly, in the case of GTA services, the person who is liable to pay freight will be the person liable to pay Service Tax as provided in Rule 2(1)(d) of the Service Tax Rules, 1994 (hereinafter referred to as "ST Rules") and Notification No.30/2012 dated 20.06.2012.

GTA is defined under Section 65B(26) which reads as follows:

'goods transport agency' means any person who provides service in relation to transportation of goods by road andissues consignment note, by whatever name called.

(emphasis supplied)

Rule 4B of the ST Rules states that any goods transport agency which provides service in relation to transport of goods by road in a goods carriage shall issue a consignment note to the recipient of service.

Circular definition – difficulty faced by the trade

A combined reading of Section 65B(26) of the Finance Act and Rule 4B of ST Rules infuses doubt in the minds of the service provider and the service receiver as to whether a person becomes a GTA by issue of consignment note or whether any person who provides services in relation to transportation goods by road in a goods carriage has to mandatorily issue a consignment note to qualify as GTA. The circular definition has caused considerable difficulty in understanding whether an individual truck owner is a goods transport agency to comply with Rule 4B of ST Rules for issue of a consignment note. This is the subject matter of dispute before various forums.

In this context, the only support for individual truck owners is the Budget Speech for the year 2004 – 05, while introducing the levy on GTA services where the Hon. Finance Minister has made it very clear that Service Tax levy shall not be applicable to individual truck owners or truck operators. The speech of the Finance Minister has been relied by various Tribunals² to hold that the services provided by individual truck owners will not be considered as GTA service.

Another round of litigation

While the applicability of the decisions after the introduction of Negative List is yet to be tested and we can foresee another round of litigation. The Tribunal in Coromandel Agro Products & Oils Ltd. vs Commr. Of C. Ex., Guntur³ has rightly captured the issue and observed that even when the truck owner provides goods transportation services, the service would be treated as a GTA service and Service Tax would be leviable on the activity.

Even after the introduction of Negative List, it can be argued that the Act will prevail over the Rules and unless the service provider issues a consignment note the recipient of service is not under any liability to pay Service Tax under reverse charge which is affirmed by many tribunals. However, this cannot be the intention of the legislature as the service receivers have control over the service providers and can prevent them from issuing consignment note in which case there will be no Service Tax on transportation services provided by any person.

Proposed amendment to the Rule

In my view, the intention of the legislature seems to be, to exclude transportation of goods other than by goods carriage from the purview of Service Tax.

Considering the unsettled position of law and the contrary decisions rendered by the Tribunal, to clear the confusion, Rule 4B of the ST Rules should be suitably modified by replacing 'Any Goods Transport Agency which provides service in relation to transportation of goods..' with 'Any person who provides services in relation to transportation of goods..".

This will be a great relief for manufacturers who avail GTA service for inward transportation of inputs or outward transportation of goods as the manufacturer would be the person liable to pay Service Tax under reverse charge. The manufacture would rather prefer paying Service Tax on the abated value⁴ of twenty five per cent rather than dispute the issue with the department and pay hefty interest if the issue is decided against the Assessee.