Government has fully exempted certain taxable services from service tax, provided to a goods transport agency (GTA) by their sub-contractors.  A notification, No.1/2009-Service Tax, to this effect was issued by the Department of Revenue, Ministry of Finance, here today. These services are generally used by the GTA during the course of transport of goods.  The specified services are :-

(i)                        clearing and forwarding agent service;

(ii)                       manpower recruitment or supply service;

(iii)                     cargo handling service;

(iv)                      storage and warehousing service;

(v)                       business auxiliary service;

(vi)                      packaging activity service;

(vii)                    business support service; and

(viii)                   supply of tangible goods service.

.          The tax on transportation of goods by road is on the gross amount of freight charges (after allowing abatement of 75%) which includes the expenditure incurred on above services.  Since no credit is available to GTA services, separately charging tax on these input services leads to double taxation, which would be mitigated now.

Service tax exemption on GTA input services prevents double taxation on subcontracted transport-related services used during goods transport. Service tax exemption applies to specified services supplied to a Goods Transport Agency by sub contractors, including clearing and forwarding, manpower supply, cargo handling, storage and warehousing, business auxiliary, packaging, business support and supply of tangible goods. The exemption addresses double taxation that would arise because expenditure on these inputs is included in the gross freight base after abatement while GTAs are ineligible for credit, thereby preventing tax being levied twice on the same transport-related inputs.