Govt exempts service tax on transport of essential items

The items include edible oil seeds, food grains & petroleum products

In the Budget 2009-10 Finance Minister Pranab Mukherjee had proposed imposition of Service Tax on transportation of wide range of commodities through rail and waterways. The imposition of Service Tax proposed to take effect from September One this year.

The decision on exemption was taken after representations from various quarters, including the Ministry of Agriculture and the Ministry of Commerce, official sources said.

The Central Board of Excise and Customs (CBEC) in two separate notifications for transport by rail and waterways said “it is necessary in the public interest so to do, exempts the taxable service provided to any person in relation to the transport of goods.” The list of exempted goods include edible oil seeds and edible oils; food grains (cereals and pulses) and flour, petroleum and petroleum products and defence and military equipments.
 
Analysts say that in the face of likely pressure on the prices of essential commodities in the wake of an impending drought like situation the government as part of price management strategy took the step of exempting Service Tax on transportation of these daily use products. Transport of parcels containing newspapers (registered with the Registrar of Newspapers) has also been exempted from the levy.

The exemption has also been extended to include raw jute and jute textile, seeds for food crops and fruits and vegetables, seeds for cattle feed, jute seeds, medicine/ pharmaceutical products, relief materials meant for victims of natural or other disasters. Luggage of travellers by train or ship, whether carried as personal luggage or booked separately in the luggage van, will also be exempted from the Service Tax.
Currently the government is levying Service Tax is at 10 per cent. Earlier, the Service Tax was being levied at 12 per cent.
But in the wake of slowdown in the economy following global financial turmoil the government reduced the Service Tax rate from 12 to 10 per cent as part of stimulus packages for the economy.