Introduction
GTA -“This taxable service means any person who provides service in relation to transport of goods by road and issues consignment note by whatever name called”
Goods Carriage –any motor vehicle constructed or adapted for use solely for the carriage of goods or for any motor vehicle not so constructed or adapted when used for carriage of goods.
Taxable service –any service provided or to be provided to any person by a goods transport agency, in relation to transport of goods by road in a goods carriage.
This tax was implemented from 1.1.2005.
Treatment
Central Government has provided for an unconditional exemption of 75% of the gross amount charged by the goods transport agency for providing the said taxable service.
Other Exemptions –
(a) services in relation to transport of fruits, vegetables, eggs or milk are exempt.
(b) There is no service tax if the amount charged is less than Rs.750 in respect of individual consignments or Rs.1500 in respect of multiple consignments.
Individual consignment –means all goods transported by a goods transport agency by road in a goods carriage for a consignee.
Onus to Pay
Consignor or Consignee of goods is – any Factory, Company, Statutory Corporation, Registered Society, Co-Operative Society, Dealer registered under Central Excise, Body Corporate, Registered Partnership Firm, then the person liable to pay service tax shall be consignor or consignee who pays or is liable to pay freight either himself or thru his agent.
If none of the consignor or consignee falls in any of the aforesaid categories, the person liable to pay service tax will be Goods transport agency itself.
CENVAT Credit Implications
“Cenvat Credit can be taken only if the taxable service provided satisfies all the conditions of input service definition”
With respect to GTA, Cenvat Credit can be availed either on inward freight or on outward freight by the manufacturer or service provider.
Inward freight is always an input service used for providing output service. But outward freight can be considered as input service for availing cenvat credit in few cases only.
Following is a brief analysis on service tax paid under goods transport agency in respect of outward freight qualifies for credit
With effect from 1.4.2008, Rule 2(l) of Cenvat Credit Rules, 2004 amended Input service definition so as to restrict Cenvat Credit upto place of removal. (Previously it is from Place of removal)
In other words, the credit is available for the services used in regard to manufacture and clearance of final products upto place of removal only.
After the amendment, Credit can be availed only in respect of G T A pertaining to outward freight where the goods moved from one Place of Removal to other Place of Removal.
Place of Removal –Factory or any other place or premises of production or manufacture of excisable goods, Warehouse or any other place or premises wherein excisable goods have been permitted to be deposited without payment of duty, Depot (premises of consignment agent) or any other place or premises from where the excisable goods are to be sold after their clearance from factory.
“With effect from 1.3.2008, taxable service in the nature of transport of goods by road services excluded from the definition of output service”
This express exclusion was introduced in order to specifically provide that Cenvat credit cannot be used to discharge service tax under the category ‘GTA’. In other words it should be paid other than thru Cenvat Credit account. (For example in Cash)
Because if GTA is considered as output service and if a manufacturer is allowed to pay the service tax on GTA through his accumulated Cenvat Credit and the same is once again availed as Cenvat Credit by him, then there is no revenue to the Government. Then it would be only a book exercise.
Audit Implications (on the above discussion)
· If Xltd has a Factory and sells goods to a customer and engages a goods transport agency and pays Rs.10000 as freight.
Here Xltd (Consignor) liable to pay freight and it is a company covered under the Onus to pay, so consignor has to pay service tax.
Service tax would be paid at the rate of 10.3 %( w.e.f.24.2.2009) on 25% of Rs.10000 (i.e., after taking unconditional exemption of 75% of the gross amount charged).
· In the above case X Ltd dispatched goods to customer on ‘to pay’ basis.
Here customer (consignee) liable to pay freight and take delivery. If the customer also covered under the category of persons liable to pay (Onus to Pay) then Consignee is liable to pay service tax.
· In the above case GTA raised invoice inclusive of service tax on Xltd.
Here GTA collecting service tax from X Ltd (Consignor) and paying to Service tax department. But ultimate service tax liability is on X Ltd since it is liable to pay freight and it is a Company covered under the Onus to pay.
To avoid risk,
X Ltd should not pay service tax amount to GTA which was raised thru invoice and X Ltd itself should pay service tax on freight to department as the onus to pay is on X Ltd.
In case total invoice amount paid to GTA then X Ltd has to collect service tax payment challan from GTA after payment to Department.
· In the above case if X Ltd appoints C & F agents to sell goods which are manufactured by them and who are authorized specifically to incur freight on behalf principal.
Here the C & F agent pays freight and Xltd who reimburses freight to C & F agent, therefore ultimate liability on Xltd.
To avoid risk, X Ltd has to collect service tax payment challan from C & F agent after payment to Department.
· Mr. A Practicing Chartered Accountant in Vizag shifts his practice and residence to Hyderabad and engages a GTA to move files and furniture.
Here GTA is liable to pay service tax since Mr. A is an individual and does not cover under the Onus to pay.
Recent Clarifications
Circular No. 104/07/2008-ST dated 06.08.2008 have clarified the following issues relating to service tax levy on goods transport by road services:
(a) Any intermediate and ancillary services provided in relation to the principal service of the road transport of goods may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road, and charges for such services are included in the invoice by the GTA and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.
(b) Where service is provided by a person who is registered as GTA service provider and issues consignment note for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing, then the service shall be treated as GTA service and not cargo handling service.
(c) In respect of time sensitive transportation of goods by road, so long as the entire transportation of goods is by road and the person transporting issues a consignment note, it would be classifiable as ‘GTA service’.
Notification No. 1/2009 ST dated 05.01.2009 has exempted following services when provided to GTA for use by the said GTA to provide services to a customer in relation to the transport of goods by a road to a customer.
(a) Clearing and forwarding agent
(b) Manpower recruitment or supply agency
(c) Cargo handling agency
(d) Storage or warehouse keeper
(e) Business auxiliary service
(f) Packaging activity
(g) Supply of tangible goods without transferring effective control and possession service
The invoice issued by such service provider, providing services should mention the name and address of the goods transport agency and also the name and date of the consignment note, by whatever name called, issued in his behalf.
Interest and Penalties
The Finance Act, 1994 provided for the imposition of penalties in the following cases when the assessee:
Failure to pay service tax to the Government in time:
Penalty: Subject to maximum of tax not paid Rs.200 per day of failure or 2% p.m of service tax, whichever is higher. (Section 76)
Interest: 13% per annum on delay of payment of tax. (Section 75)
Period on which Interest and penalty to be calculated –starting with the first day after due date till the date of actual compliance.
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