Overnight U-Turn to Amendment Made in Transport of Goods by Rail

Overnight U-turn to amendment made in Transport of Goods by Rail

Ashok Batra, B.Com (Hons), LLB, FCA

“It can happen only in India” is a melodious rhyme of song of a Hindi Movie released a couple of years ago. At that time like majority of other listeners of music I took the aforementioned stanza in a light & humorous mode. However, on 1st Sept 2009 when I read the Notification No. 33/2009-ST & Notification No. 34/2009-ST both dated 01-09-2009, my first & instant reaction was “It can happen only in India” and I realized the application of bitter truth contained in foregoing verse. In the following paragraphs I have tried to trace the sequence of events which compelled me to give such pointed reaction.

Service Tax has been levied ever since 01-05-2006 on “Transportation of Goods in Containers by Rail Services” provided to any person by any other person other than government railway by virtue of addition of sub-clause (zzzp) in clause (105) to section 65 of Finance Act 1994.However, on 06-07-2009 at the time of presentation of union budget for the financial year 2009-10 our Hon’ble Finance Minister proposed to levy from notified date service tax on goods transported by railways including Government railways, whether in containers or otherwise. It was also promised by him that suitableabatement and exemption to specified goods would be provided through issuance of notification at the appropriate time. The Union Budget was passed by Rajya Sabha ("Council of States") on 30th July 2009 & it received the assent of President of India on 19th August 2009. Consequently, Union Budget became Finance (No 2) Act 2009. In order to implement foregoing abatement & exemption certain notifications were issued in the first instance. Subsequently in very short span of time these notifications were overturned. All these lightning fast developments have been given in the following table for the twin purpose of ease of understanding & better retention:-

Sl. No. / Notification No. / Date / Subject & its effect,( if any)together with comments
1. / 28/2009-ST / 31-8-2009 / Exemption from the levy of whole of the service tax was granted to certain specified goods w.e.f. 01-9-2009 in relation to transport of goods by rail
2. / 29/2009-ST / 31-08-2009 / Following amendment to Notification No. 1/2006-ST dated 01-03-2006 was made.
“Transport of Goods in Containers by Rail specified at Sl. No. 11 was substituted with the expression ‘Transport of Goods by Rail’.”
3. / 33/2009-ST / 01-09-2009 / Exemption has been granted from the levy of service tax in respect of transportation of goods by rail. However, according to the proviso of this notification no exemption would be available if the service provider happens to be any person other than Government Railway.
4. / 34/2009-ST / 01-09-2009 / This Notification again amended Notification No. 1/2006 & brought it back to its position before issue of Notification No. 29/2009-ST. To put it differently, Notification No 34/2009-ST once again amended the notification no. 1/2006 by substituting the entry no. 11 from “Transport of Goods by Rail” to “Transport of Goods in Container by Rail”. Thus, Notification No. 34/2009-ST has quashed the Notification No 29/2009-ST within 24 hours of its issue date.
5. / 36/2009-ST / 09-09-2009 / Annulment of Notification No. 28/2009-ST dated 01-09-2009 except as respects things done or omitted to be done before such rescission. Thus this Notification repealed the Notification No. 28/2009-ST within a short span of eight days.

To conclude, the entire excise of expanding the scope of Transport of Goods by train has gone in vain. From the perspective of Service Tax the position has come back to square one. It would have been far better if before amending (expanding) the scope of services under consideration the Government had taken into consideration all the relevant factors (objections).

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