Service Tax on Goods Transport
Agency Services
By
swamy associates
chennai – coimbatore – bangalore - hyderabad
Definitions
Goods Transport Agency means any commercial concern
which provides service in relation to transport of goods
by road and issues consignment note, by whatever name
called.
Taxable service means, any service provided to a customer,
by a Goods Transport Agency, in relation to transport of
Goods by road in a goods carriage.
Goods carriage means any motor vehicle constructed or
Adapted for use solely for the carriage of goods, or any
motor vehicle not so constructed or adapted, when used
for the carriage of goods.
F
Who is liable to pay?
Any person who pays or is liable to pay freight,
either by himself, or through his agent,
If
If the consignor or the consignee is
a)
b)
c)
d)
e)
f)
g)
h)
A factory;
Company;
Corporation;
Society;
Co-operative society;
Registered dealer of excisable goods;
Body corporate; or
Registered partnership firm.
F
Practical issues…
X – a Company, registered under the Companies Act
is transporting goods to an Individual Y, on “To Pay”
basis. Who is liable for payment of Service Tax?
Since the consignor is a Company, the liability is on
the person paying the freight i.e. “Y”, notwithstanding
that he is an individual.
X – a Company, registered under the Companies Act
is transporting goods to an Individual Y, on payment
of freight. Who is liable for payment of Service Tax?
Since the consignor is a Company, the liability is on
the person paying the freight i.e. the company, “X”.
F
Practical issues…
Y – an individual is transporting goods to a company, “X”
on payment of freight. Who is liable for payment
of Service Tax?
Since the consignee is a Company, the liability is on
the person paying the freight i.e. “Y”, notwithstanding
that he is an individual.
Y – an individual is transporting goods to a company, “X”
on “To pay” basis. Who is liable for payment
of Service Tax?
Since the consignee is a Company, the liability is on
the person paying the freight i.e. the company “X”.
F
Practical issues…
“X”, a Company based in Chennai, has its consignment
Agent at Delhi. The Company transports goods to him,
on “To Pay” basis. The Transport Agency raises the bill
in the name of X, but the freight is paid by the consignment
agent, directly to the GTA. Who is liable for payment of
Service Tax?
In as much as the bills are raised against “X”, the
consignment agent is paying the freight, only on behalf of
“X”. In other words, “X” is paying the freight, through the
consignment agent. As such, the liability for payment of
Service Tax is on “X”.
F
Practical issues…
“X”, a Company sells the goods to “Y”. The freight for the
movement of the goods has been paid by “X”. “X” collects
this freight from “Y”, by showing it in the invoice, which is
paid by “Y”, to “X”. Who is liable for payment of
Service Tax?
Since this is a case of pure sale, “X” cannot be said to be
paying the freight on behalf of “Y”. “X” is only getting
reimbursement of the freight paid by him, initially. As
such, the liability for payment of Service Tax will only be
on “X”.
F
Practical issues.
“X”, an individual is transporting goods to another
Individual, “Y”. Who is liable for payment of
Service Tax?
Since, both the consignor and the consignee are not
falling under the specified categories, the liability is
on the Goods Transport Agency.
F
Exemptions.
F
No Service tax, for transportation of fruits, vegetables,
eggs or milk.
F
Service tax is payable only on 25 % of the freight.
This is subject to the conditions :
a) No Credit of duty paid on inputs/ capital goods used for
providing such taxable service, has been taken (By whom?) .
b) The benefit of Notification 12/2003 is not availed. (This
Notification cannot be practically availed in case of GTA service).
F
Exemptions...
F
No Service tax, if the gross amount charged on consignments
transported in a goods carriage does not exceed Rs.1500.
F
Example.
“A” transports his goods in a goods carriage. No other goods are
are loaded in the goods carriage. A pays a freight of Rs.1300.
A is not liable for payment of any service tax.
“A” transports his goods in a goods carriage. He pays a freight
of Rs.1300. Some other goods are also being transported in the
same goods carriage, involving a freight of Rs.500.
A is not eligible for this exemption.
How A will know about the other goods being transported together?
F
Exemptions...
F
No Service tax, if the gross amount charged on an individual
consignment, transported in a goods carriage does not exceed
Rs.750.
“Individual consignment” means all goods transported by a GTA,
in a goods carriage, for a consignee.
This exemption will come into play, when the consignments of
several consignors are transported together.
F
Example.
The following goods are transported together in a goods carriage.
Consignor
Consignee Freight
Eligibility
for
Exemption
A
X
Rs.500
A
X
Rs.500
B
Y
Rs.700
YES.
C
Z
Rs.800
NO.
D
P
Rs.600
E
P
Rs.600
NO.
NO.
Whether availment of credit in respect of inputs and capital goods,
relating to the manufacturing activity, by a manufacturer, would
disentitle him, from paying service tax on 25 % of the freight?
No. Availment of credit in respect of inputs / capital goods,
for providing such taxable service (service of Goods transport)
alone is restricted, as per Notification 32/2004.
Availment of credit in respect of the manufacturing activity, has
got nothing to do with claiming the benefit of 32/2004.
As a manufacturer, I have not taken any credit in respect of the
inputs and capital goods, meant for the transportation service.
I do not know, whether my transporter has availed such credit
or not? Can I be denied the benefit of Notification 32/2004,
on the ground that the transporter has availed credit? How will
I know, whether the transporter has taken credit or not?
What is sought to be prohibited is availment of credit – per se.
So, the benefit can be denied to you, if the transporter has taken
credit. So, before availing this exemption, you may ensure that
the transporter has not availed any credit. You may also obtain
an undertaking from him, to such effect.
Easier said than done.
Am a manufacturer. Can I use the Cenvat Credit balance available
with me, for payment of Service Tax on GTA services?
Yes. As per Rule 3(4)(e) of the Cenvat Credit Rules, 2004
Cenvat credit can be used for payment of “service tax on
“any output service”.
The definition of “output service” also supports the view.
Am a manufacturer. I have paid Service Tax on GTA. Can I avail
Credit of the same?
Yes. If the service qualifies to be an “input service” for you.
For example, the following are “input service”
a) Freight for transportation of finished goods from the factory
to the depot/customer; From the depot to the customer;
b) Freight for transportation of the inputs / capital goods to the
factory;
c) Freight for movement of goods from / to the job workers; etc.
What is the document for availing such credit?
Though no specific document has been prescribed in this regard,
Credit can be availed based on the “Consignment notes”, which
would indicate the freight amount, from which the service tax
liability can be calculated. This should be supported by payment
of service tax, either by way of debit in Cenvat Credit Account or
by way of TR 6 Challan.
Whether the facility of Centralised Registration is
available for the users of GTA services?
The provisions contained in Rule 4 of the Service Tax Rules, as to
Centralised Registration, are designed only for service providers.
But, there is no harm, if the provisions are also made applicable to
the users of GTA services.
If freight for various locations are paid only from one location, only
such location should be registered. This does not require any
permission.
If freight is paid in various locations and if centralised accounting
is done, the jurisdictional Commissioner may be approached for
Centralised Registration.
THANKS
Swamy associates
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