Paradox of Service Tax provision

Impact of Service Tax in Public life of India   

The most critical type of Service Tax is Goods Transport Agency Service (in short GTA). Here, Service Tax is paid on the freight amount of the Goods Vehicle. There is abatement of 75% of the freight amount and Tax is paid on the 25% of the value of freight.

Who is required to pay S.Tax?

As specified in Notifications No 35/2004, the consignor or consignee who has paid the freight is required to pay Tax.

Who has been specified in Notfn 35/2004?

Limited Companies, public or private, body corporate, society & partnership.

Then what Transporter & Transporter Agency is required to do so far GTA is concerned?

The Rule 4B of Service Tax Rules, 1994 says that he has to issue a consignment note and tickmark in the consignment note as to who will make payment of Service Tax, consignor/consignee/GTA. That means the Service Tax provision has given them a responsibility to determine whether the consignor or consignee or the GTA will make payment of Service Tax. What is practically happening that a Transporting Agency is collecting Service Tax, keeping some amount and depositing the rest amount as per his conscience and courage.

When the Goods Transporting Agency (in short GTA) is required to pay S. Tax?

The GTA will pay only in cvases other than mentioned in Norfn 35/2004 that means in case of individuals like Rama ,Vima & Shyama etc & Hindu Undivided Family. When these individuals pay the freight and such freight amount exceeds Rs 10 lakhs, then only GTA will pay Service Tax otherwise NOT. What is happening is the reverse.

I know personally, there is a transporter in front of Rajkumar College, Raipur (near Procee Commercial Training Institute) Chhattisgarh who is not Regd and has not paid Service Tax for several years even though it is a partnership firm and as per Notfn 35/2004, they have to pay S.Tax.

The Service Receiver has to pay Tax from zero point. Only GTA is entitled to avail the initial exemption of Rs 10 lakhs.

So, why it is happening?

The inadequate staff of the Tax collecting department and lack of will power, the level of honesty of tax payers & the level of grasping power of professional Chartered Accountants in the field. Govt officers say that they are too busy, Businessman as the name suggests is already busy and C.A nods his head as per demand of the situation.

The short history of the Tax

In spite of these facts, it is the largest Revenue earning category of Service Tax. The reason is the all pervading Transport system in a big country. Long back Service Tax was imposed on Transporters. At that time, it was called “Goods Operator” Service. An unprecedented strike took place in India. The Govt had to take back the law. It was again introduced in 1.1.2005 named as Goods Transport Agency ( in short GTA ).

Service tax was collected from Service providers but in case of GTA, it was meant to be collected from Service receiver also. M/s Lagh Bharti Udyog a Service Receiver contested on this point in Supreme Court of India that when there is no provision in the charging section 66 of the Finance Act, 1994 how the Govt of India can collect tax from Receiver. The Supreme Court passed his verdict in favour of the party. The Govt therefore resorted a revalidation provision. As per this provision, the Parliament can revalidate a provision in spite of any decree, decision of a Court, Tribunal. So, Govt won and Tax is being collected. According the mechanism of Reverse Charge was introduced by making an amendment in Section 66 of the Finance Act, 1994

Paradox of the Provision

Let me give an example which will elevate the Service tax law to a position of piece of comedy. Sometime back, I purchased an Air Conditioner, Pandri, Raipur, Chhattisgarh who is partnership firm. So, they are covered under specified category. I have paid Rs 80/- as the freight and therefore I am liable for payment of Service Tax. As per law, I have to visit Servivce Tax Department, obtain a Service Tax Registration and pay Service Tax @12.36% of Rs 80/- i.e Rs 9.88. Next, I will cancel Regn and will again apply for it, in the next purcahse. What I will do, the rest of India is also required to do. It is ridiculous. I ponder in 121 crore of people why there is not a single person who can frame a rule with accuracy and clear cut provision.

Flash back

Now, it is 5.8 A.M. early morning. I realize the power the parliament in Revalidation procedure in spite of Supreme Court Ruling. That means in India i.e Bharat, the Parliament is supreme and not Supreme Court. The power of the Parliamentarian took me into my childhood memory when I was lean & thin boy studying in B.B High School, Pritipur, Cuttack, Odisha. In Annual Function of the High School, the local MP visits, speaks to the students and the final action was interesting at the time of departure. 2/3 live chickens were called by a subordinate staff of the said Representative and practically thrown to the back side of the Commander jeep. The chickens cry loud & loud and the chicken owners eyes give a blending expression of proudness, pleasure and also at the same time unhappiness. He is proud & there is reason of pleasure that his goods was required in such a big occasion. He is unhappy as he was not paid before such forced purchase and there is a possibility that he may not be paid. In fact, he was not paid.

I say to myself who is powerful and now I fully realize the power of “Revalidating clause”