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.

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)A factory; b)Company; c)Corporation; d)Society; e)Co-operative society; f)Registered dealer of excisable goods; g)Body corporate; or h)Registered partnership firm.

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? Practical issues… 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.

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.

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.

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.

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.

Exemptions. No Service tax, for transportation of fruits, vegetables, eggs or milk. 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).

Exemptions... No Service tax, if the gross amount charged on consignments transported in a goods carriage does not exceed Rs 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 A is not liable for payment of any service tax. A transports his goods in a goods carriage. He pays a freight of Rs 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?

Exemptions... 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.

Example. The following goods are transported together in a goods carriage. ConsignorConsigneeFreightEligibility for Exemption AXRs.500 NO. AXRs.500 BYRs.700YES. CZRs.800NO. DPRs.600 NO. EPRs.600

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.

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