Servie tax liability of Toll Tax

[Sanjay Aggarwal]

One of my client is a limited company and getting transportation bill from GTA. The GTA is mentioning transportation charges as well as toll tax separately.

Now, my question is whether that limited company is liable to pay service tax on the gross amount (transportation charges plus toll tax ) or only transportation charges.

[KASTURI SETHI]

Sh.Sanjay Aggarwal Ji,

As per Section 67 of the Finance Act, 1994 Service Tax is levied ongross amount charged for taxable service provided or received and not Gross Receipt. So ST is payable on the amount of freight only and not on toll tax. Entire freight amount paid is gross amount for the purpose of payment of ST. Toll tax has to be excluded.

[Ganeshan Kalyani]

Sir, I agree with Sri Kasturi Sir's view. Service means any activity carried out by one person for another for consideration. And consideration means any amount that is charged for service provided or agreed to be provided by service provider to service receiver.

In your query, GTA is paid for carrying goods from one place to another. The consideration is agreed for doing the same. Toll is not the charges for the service provided, but in fact it is incidental charges. The service provider has to pay toll while his vehicle is on road. And this is claimed from service receiver. Hence it is reimbursement and not consideration and therefore no service tax on toll.

However, w.e.f. 14.05.2015, reimbursable expenses are also considered as consideration and service tax shall be paid. But still there is logical to think that toll expenses claim is supported with receipt. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

I agree with you that definition of 'consideration' under Explanation (a) to Section 67 of the Finance Act has changed with effect from 14.5.15 and any reimbursable expenditure or cost incurred has become part of taxable value but still taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax . These fall under "except in such circumstances, and subject to such conditions, as may be prescribed;"

Sir, I am looking forward to your opinion on the issue.

[Ganeshan Kalyani]

Sir, in my view toll is not a tax, cess or duty. Toll is a fees paid for accessing the road. It is collected for recovering the cost of construction of the road. So toll may not get excluded from consideration clause. But taxes like VAT/CST, Cess like SBC and duty like excise duty if paid and claimed as reimbursement then it will qualify from exemption from service tax. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani ji,

Pl. go through the Board's circular in this context. Service Tax on toll fee or tax is applicable only if the collecting agency retains any amount with them. If no toll fee or tax is retained and the same is deposited with Govt. no ST is applicable. Further, there are a few case laws of CESTAT where it has been held that Toll tax collection is a sovereign function and not taxable. Whether toll is a tax or fee it makes no difference as its collection is a sovereign function.

Service tax not leviable on toll fee paid by roads users - Claridications

Circular No. 152/3/2012-S.T., dated 22-2-2012

Board has issued this circular but the issue whether toll tax is chargeable to Service Tax or not is pending with Supreme Court.

Demand - Collection of toll tax whether chargeable to Service Tax under Business Auxiliary Service

The Supreme Court Bench comprising Hon’ble Mr. Justice R.M. Lodha and Hon’ble Mr. Justice Shiva Kirti Singh on 10-2-2014 admitted the Civil Appeal No. 2650 of 2013 filed by Commissioner of Central Excise and Service Tax against the CESTAT Final Order No. ST/236/2011(PB), dated 19-5-2011 as reported in 2011 (5) TMI 257 - CESTAT, NEW DELHI - 2011 (24) S.T.R. 611 (Tri.-Del.)[Intertoll India Consultants (P) Ltd. v. Commissioner].While admitting the appeal, the Supreme Court passed the following order :

“Appeal is admitted for hearing in due course.”

The Appellate Tribunal in its impugned order had held that in absence of repeated dealings, users of bridge cannot be considered as customers of either person collecting toll or owner of bridge. Also, collector of toll could not be said to be client of owner of the bridge, as they were not promoting any customer care service of owner. There was no visible activity done to please user of bridge to take care of their needs or induce them to come again and again to bridge. It may be that users of bridge may be paying toll fees reluctantly as that was the only means to connect tow banks of river. In that view, collection of toll could not be said to be liable to Service Tax as Business Auxiliary Service either prior or post-amendment of its definition under Finance Act, 1994. Person collecting the toll is liable to pay Service Tax under heading ‘management, maintenance and repair of immovable property’ from 16-6-2005. Collection of duties and taxes levied by Government is exempted from Service Tax liability under Notification No. 13/2004-S.T. A category which is specifically covered under the Service Tax from specific date, cannot be taxed under any other heading prior to that date.

[Commissioner v. Intertoll India Consultants (P) Ltd.- 2014 (36) S.T.R. J154 (S.C.)]

It is natural that until or unless the issue is settled by the Hon'ble Supreme Court, the assessees will follow the Board's circular.

[KASTURI SETHI]

Every reimbursable expenditure is not taxable.

[Ganeshan Kalyani]

Yes sir. Agree with you Sir.

AI Summary

Service Tax Applies Only to Transportation Charges, Not Toll Fees, Under Section 67 of the Finance Act, 1994. A limited company inquired about its service tax liability on transportation bills received from a Goods Transport Agency (GTA), specifically whether the tax applies to both transportation charges and toll tax. The consensus among respondents is that service tax should be levied only on the transportation charges, not on toll tax, as toll fees are considered reimbursable expenses and not part of the taxable service value. This view aligns with Section 67 of the Finance Act, 1994, and a Board circular stating that toll fees are not subject to service tax unless retained by the collecting agency. The issue is pending before the Supreme Court for final determination.