The ways and means of imposing the governments new service tax on goods transport has changed significantly from what was originally planned in Budget 2004. The government has now shifted the onus of service tax collection on goods transport from the service provider to the consigner/consignee of the goods. The notification on this clearly states that the person making payment towards the freight would be liable to pay the service tax on the basis of the consignment note.
This is really bizarre and worse than the earlier roll-backs. On all other services where service tax is imposed, the service provider is liable to charge the service tax, for eg: repairs and service, clearing and forwarding, interior and civil work, etc. But in the case of the service tax on goods transport, the government has buckled under the transport lobbys pressure. And shifted the onus of taxing the transportation services to trade and industry.
No doubt, transportation services should be taxed. But this is certainly not the right way to collect the tax! When the same tax can collected from the minority service providers, why should you collect it from the user of the services?
The government should note that collecting tax from the transport service provider instead of trade and industry would have been easier and simpler, and the revenue too would have been the same. There are many grey areas which will lead to the harassment of trade and industry.
As per the extended definition, trade and industry would also include hospitals, co-op societies, educational institutions and anybody using transportation services. Does the service tax department possess the manpower and expertise to collect the tax from every nook and corner of the country?
One can say with certainty that India has changed. The increase in annual economic growth from 3.5% to 5.5%, growth in national literacy from 44% to 68% and increase in life expectancy from 50 to 65 years in a span of about two decades are all positive figures.
It is true that the potential of India is far greater than its performance so far. What is most important is to break bureaucratic shackles in order to allow greater play to entrepreneurship and give a real fillip to honesty. The tax regime must be more friendly and should lead to greater voluntary compliance.
Old ideas whose time has gone should be discarded. Henry James rightly said: Ideas are, in truth, forces. Infinite, too, is the power of personality. A union of the two always makes history. Fortunately, India has both at present.
Sucheta Dalal in her article Banking reforms: more threat than promise has penned beautifully what bankers and bureaucrats were unable to figure out.
Any takers? Cannot be! That is the fate of our country! Such reforms will never see the light of day, Im sure.