Toll roads to come under service tax net

NEW DELHI: A drive on the national highway could cost you a little more. The finance ministry has got the law ministry’s nod to levy service tax on the commission charged by agencies collecting toll charges on behalf of the National Highways Authority of India (NHAI). A toll-tax, as it is commonly known, is levied by NHAI for maintenance of roads. The NHAI outsources the job of collection to various agencies who, in turn, are paid a commission.

The finance ministry had sought a legal opinion on levying service tax on the commission charged by these agencies. The law ministry is understood to have opined that there is no bar on charging service tax on such agencies. The same principle will hold for agents who collect, say, octroi on behalf of state-governments.

The service provided by such agents can be technically categorised as a business auxiliary service. Although business auxiliary services are under the net, the centre has so far not charged service tax on agencies collecting toll or octroi. It wanted a legal opinion to avoid possible disputes. A final decision will be taken after factoring in the law ministry’s views, said a government source.

Meanwhile, an internal wing of the revenue department is understood to have made out a case for levying service tax on the entire toll charge levied by the NHAI. If accepted by the government, this would pinch road users more.

The ministry of shipping, road transport and highways is learnt to have taken up the matter with the finance ministry, raising objections to the proposal to levy service tax.