Service Tax on Goods Transport Agency [GTA]

Service tax on goods transport agency
Service tax on goods transport agency

 

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1. Definitions

a) Goods Transport Agency   

If these services are provided as independent activities and not as means for successful provision of GTA Service, then they will not be covered under GTA and abatement will not be allowed.

The use of the phrase ‘in relation to’ has extended the scope of the definition of GTA. It includes not only the actual transportation of goods, but any intermediate/ancillary service provided in relation to such transportation, like loading/unloading, packing/unpacking, transhipment, temporary warehousing, etc.

Therefore, issue of Consignment Note (C/N) is integral and mandatory requirement before any road transport can be said to be GTA.

As per Section 65B(26) of the Finance Act, 1994; “Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called”.

b) Courier Agency

As per section 65B(20) of the Act, “courier agency means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles”.

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2. Taxability

a) Services by way of transportation of goods by road are taxable, ONLY IF the same is provided by -

(i) a goods transportation agency; or

(ii) courier agency.

Services of Road Transport provided by all others are not taxable because they are covered by the Negative List u/s 66D(p)(i) of the Act.

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3. Person Liable to Pay Service Tax [Reverse Charge on GTA Service] 

As per Entry No. A(ii) of N/No.-30/2012, reverse charge is applicable only when taxable service provided or agreed to be provided  by a goods transport agency in respect of  transportation  of goods by road, where the  person liable to pay freight is,—

  • any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
  • any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;
  • any co-operative society established by or under any law;
  • any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under;
  • any body corporate established, by or under any law; or
  • any partnership firm whether registered or not under any law including association of persons;

So, it can be clearly seen that an individual/proprietorship firm is not covered in the above ‘specified category’. It means, if the freight is paid (either himself or through his agent) by an individual/proprietorship firm or HUF then the service tax thereon shall be paid by the GTA itself.

Note -

  1. Courier agency is not covered under reverse charge. Any person receiving services of a courier agency are not liable to pay service tax on payment of courier charges.
  2. But, if the person liable to pay freight is located in non-taxable territory (Jammu & Kashmir), then the person liable to pay service tax shall be the service provider. [Proviso to Rule 2(1)(d)].

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4.  Abatement 

a) Notification No. 26/2012-ST  has allowed abatement of 75% on GTA. It means that if the value of GTA service (freight) is Rs. 100, service tax is exempted on Rs. 75 and service tax @ 12.36% (including Ed. & SHE Cess) shall be paid only on the balance value of Rs. 25. So, effective rate of service tax on GTA service is 3.09% of total freight.

b) The abatement can be availed by the person liable to pay service tax on GTA. In other words, in case of reverse charge, the service recipient can avail abatement and pay tax @ 3.09% and when reverse charge is not applicable, than the GTA can avail abatement and pay tax @ 3.09%.

c) Condition For Abatement – CENVAT Credit

(I) The abatement is available subject to the condition that the CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) Person who would be liable to pay service tax on GTA would obtain certificate from GTA that he has not availed Cenvat credit and accordingly, person liable to pay service tax would avail benefit of 75% abatement as per notification. If person liable to pay service tax does not obtain certificate, he would be liable to pay service tax on entire value of the service without availing abatement.

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5. Registration of GTA

a) Registration is compulsory, when the aggregate value of taxable services, provided from all the premises, of all descriptions, exceeds Rs. 9 Lacs. So, a GTA need not apply for service tax registration until the limit of Rs. 9 Lac is reached.

b) It is compulsory for a recipient of GTA service to take registration for service tax. if reverse charge is applicable, service recipient becomes liable to pay service tax and section 69(1) of the Act mandates that every person liable to pay tax shall obtain service tax registration.

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6. Place of Provision of Services

As per Rule 10 of place of provision of services rules, the place of provision of services of GTA would be the location of the person liable to pay tax.

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7. Exemptions

a) Threshold Exemption of Rs.10Lacs

Threshold exemption of Rs. 10 Lacs available under N/No. – 33/2012-ST, but the same is allowed only to the service provider.  The service recipient liable to pay tax under RCM, on services covered u/s 68(2) has been specifically excluded to avail the threshold exemption.

b) Value Based Exemption

Mega Exemption Notification No. 25/2012-ST has exempted low value consignments from the levy of service tax, as follows:

(a) Where the gross amount charged for the transportation of goods on a consignment transported in a single goods carriage is upto Rs 1,500/-; or

(b) Where the gross amount charged for transportation of all such goods for a single consignee in the goods carriage is upto Rs. 750/.

ILLUSTRATION: A company receives goods from a GTA in a truck. No other goods are loaded in that truck. The company pays freight of Rs. 1500/- to GTA. No service tax is payable by any person on this consignment as it is exempted.

ILLUSTRATION: A company receives goods from a GTA in a truck. Some other goods not belonging to the company are also loaded in the truck. The company pays freight of Rs. 900/- to GTA. The freight of other goods is Rs. 500/-. Service Tax is not payable by the company on this consignment as the total freight for the truck is Rs. 1400 (<1501) so it is exempted.

ILLUSTRATION: In the above illustration, if the freight of other goods is Rs. 700/-, then the total freight for the truck is Rs. 1600 (>1500). Freight paid by company is Rs. 900 (>750). So, exemption is not available and the company should pay service tax on Rs. 900/-.

c) General Exemption

N/No. 3/2013-ST dated 01-03-2013 has amended the N/No. 25/2012 w.e.f. 01-04-2013, extending exemption for services provided by a GTA, by way of transport in a goods carriage of;

  •  agricultural produce;
  • foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages;
  • chemical fertilizer and oil cakes;
  • newspaper or magazines registered with the Registrar of Newspapers;
  • relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or
  • defense or military equipments;”

This amendment is a positive for the FMCG and food companies like Hindustan Unilever, Nestle, ITC, Perfetti, Kellogs, etc. and those manufacturing or trading/dealing or retailers (including departmental stores like Big Bazaar, Vishal Mega Mart, etc.) in these products. It is pertinent to mention that prior to this amendment; the exemption was available on fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage.

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d) Exemption on Transport of Goods for Export

Service provided to an exporter for transport of the said goods by goods transport agency in a goods carriage  from any container freight station or inland container depot to the port or airport, as the case may be, from where the goods are exported; or Service provided to an exporter in relation to transport of the said goods by goods transport agency in a goods carriage  directly from their place of removal, to an inland container depot, a container freight station, a port or airport, as the case may be, from where the goods are exported would be exempt from the whole of the service tax leviable thereon under section 66B of the Act. However, The exporter shall have to produce the consignment note, by whatever name called, issued in his name. Further, such exemption would be granted subject to conditions specified in Notification No. 31/2012 – Service Tax, dated 20.06.2012.

 

 

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