We are registered company, manufacturing the bricks. To supply of bricks, we takes the service of individual transporter and recover the amount from our client with higher value along with value of bricks. e.g. if we pay 100 rs. to individual transporter we recover rs. 110 to our client on invoice along with value of bricks. now my query is in the whole transaction who is liable to pay service tax to government and on which amount 100 or 110.
In case of GTA service, service receiver is liable to pay service tax to the Govt. Now, if you pay100 to the individual transporter, you are supposed to pay10.30 (assuming the rate 10.30% in your case) as service tax to the Govt. by 5th/6th of the month next to the month in which payment is made to the transporter. This liability arises even if you are receiving nothing as reimbursement from your client. If you are recovering over and above10.30 from the client, you are not supposed to keep this amount with yourself, either you refund the excess recovered amount of service tax to the client or pay to the Govt. It needs to be noted that even if payment to the transporter does not happen, service tax needs to be discharged now on accrual basis if service has been provided and completed or invoice has been raised by the transporter. There is no provision for non-payment of service tax even if payment does not happen to the transporter.
sir, presently we are not recovering any amount of service tax from the client. we are giving lumpsum invoice of Rs. 110 or may be more like 150 i.e. any amount. we are not showing any service tax on invoice raised on client. this extra income is our profit? now my problem is on what amount we are liable to pay service tax Rs. 100 or higher lumpsum amount charged from client? Please do the needful.
You are required to pay service tax as service receiver only on the actual amount which you are paying to transporter.
E.g. You pay Rs. 100 to transporter and recover Rs. 110 from client. In this case
1. You will pay service tax on Rs. 100 only.
2. You are not providing any service to your client and therefore, you cannot recover service tax amount from it. It is merely an arrangement made by your company on behalf of your client even if you recover amount over and above Rs. 100 from your client. Excess of Rs. 100 recovered is your profit for making arrangement of transport and not leviable to Service tax. Even there are case-laws in supporting of it.....
In simple words, you apply service tax rate on the amount paid to the transporter and pay to the Govt. by due date. This service tax liability can be paid in cash or through cenvat credit account, if balance is available in your account vide Commissioner of Central Excise.Versus M/s Nahar Spinning Mills Ltd.- PUNJAB AND HARYANA HIGH COURT. Alternatively, if you pay the amount in cash, you can also take input credit of the same.
Actually source of case law was corrupted, I am not able to provide case law at the moment, will get back you soon.
As regards, the payment of service tax on GTA, although there is case law as referred above of High Court, but this matter is subject to great litigation and by amendment in Budget 2008 'GTA service' has been specifically excluded from purview of definition of 'output service'. Therefore it is suggested to pay service tax by cash only and then take credit of it....
a) First of all there is no service tax, when you availed the service tax from individual truck owners or operators as same are not GTA. You may refer CCE&C, Guntur v Kanaka Durga Agro Oil Products Pvt. Ltd. 2009 (15) STR 399 (Tri.-Bang.) and there are other numerous judgment of CESTAT and you may also refer FM speech in Budget 2004. Therefore, you are not liable to pay tax on reverse charge basis on freight paid to individual truck owner.
b) Now the question arises, whether you or your client are liable to pay tax on the amount received by you from client. The Answer is both are not liable to pay service because as per Rule 2(1)(d)(v), the person who pays fright is liable to pay tax when such service are provided by GTA and your company is not GTA (not issue consignment Note). One thing to be noted that mere transportation of goods by road, per se, is not a taxable service. your issue is directly covered by Tribunal decision in two cases. will try to give you citation.
Rule 2(1)(d)(v) of Service Tax Rules: In relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,- (a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948) (b) any company 14formed or registered under the Companies Act, 1956 (1 of 1956); (c) any corporation established by or under any law; (d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; (e) any co-operative society established by or under any law; (f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or (g) any body corporate established, or a partnership firm registered, by or under any law, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage will be liable to pay service tax. Meaning of Goods Transport Agency - 65(50b) (revised definition): "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. It means that individual truck owners are also covered. Secondly, issue of consignment note is mandatory except in some exempted cases, if any. Also refer to Notification No. 12/2008 and 13/2008: 75% value is now unconditionally exempt. GTA is excluded from the definition of output service and hence it is input service only. Being an input service, person paying service tax can avail input credit of the same but GTA service provider is not allowed to take input credit of services utilized to provide the GTA service because input credit can be taken only in connection with the output service and GTA service is not output service. In one TRU letter it is clearly mentioned that person paying under reverse charge method is not required to prove non-availment of input credit by GTA service provider. It should be noted that input credit of service tax can be taken only in respect of inward transportation of inputs or capital goods and outward transportation upto the place of removal. While paying the Service Tax on GTA, a bifurcation of inward freight and outward freight is required because CENVAT Credit on outward freight is questionable at many courts. Vide M.F. (D.R) Letter D.O.F. No. 334/1/2008-TRU, dated 29.3.2008: Notification No. 1/2006-S.T. amended by notification no. 12/2008 and new Notification No. 13/2008-S.T., issued.- In the case of services provided for the transport of goods by road in a goods carriage, service tax is required to be paid by certain categories of persons who pay the freight instead of the service provider namely Goods Transport Agency. The actual amount of service tax payable is 25% of the amount of freight i.e. 75% of amount of freight is provided as abatement, subject of the condition that no Cenvat credit of the duty paid has been availed of under Cenvat Credit Scheme. It has been represented that fulfillment of the condition of non-availment of Cenvat credit by the service provider is, at times, difficult to prove, when the service tax is required to be paid not by the service provider but by the consignor or consignee who pays the freight. Taking into account the special nature of the goods transport agency (GTA) service, it is being exempted from the payment of service tax unconditionally to the extent of 75% of the freight. In other words, service tax is required to be paid only on 25% of the freight irrespective of who pays the service tax. Simultaneously, the benefit of Cenvat credit has been withdrawn to GTA service under Cenvat Credit Scheme by deleting the said service from the scope of output service in the CENVAT Credit Rules, 2004. Henceforth, the person who is required to pay service tax under reverse charge method on GTA service can pay service tax on 25% of the freight unconditionally. Recipient of GTA service paying service tax under reverse charge method is no more required to prove non-availment of CENVAT credit by GTA service provider.
AFTER 18.04.2006 ASSESSEES NOT ENTITLED TO UTILIZE CENVAT CREDIT FOR PAYMENT OF SERVICE TAX ON GTA Appellant is not simply a provider of output service but also a manufacturer of the excisable goods. The appellant contended that till 28-2-2008 for the manufacture of final products the service of Goods Transport Agency remained an output service and, therefore, Cenvat Credit was permissible to be utilized for payment of service tax upto 28-2-2008. As far as the period beyond 18-4-2006 is concerned, the Tribunal in the case of Alstom Ltd. v. CCE [2008 - CESTAT, CHENNAI] held in that case that the credit cannot be utilized for paying service tax for this period as well – As such, as far as the period beyond 18-4-2006 is concerned, held that the appellant/respondent-assessees are not entitled to utilize Cenvat Credit for payment of service tax on GTA service and therefore, the duty demand and demand of interest are justified – Penalty dropped. CESTAT, WEST ZONAL BENCH, MUMBAI GIMATEX INDUSTRIES PVT. LTD. Versus COMMISSIONER OF C. EX., NAGPUR Final Order Nos. A/297-298/2011-WZB/C-IV(SMB), dated 14-7-2011 in Appeal Nos. E/1146-1147/2009-Mum [Order]. – Heard both sides. 2. The appellants filed these appeals against Orders-in-Appeal No. SR/191/NGP/2009 and SR/190/NGP/2009 both dated 4-9-2009 whereby the Commissioner (Appeals) upheld the orders of the lower adjudicating authority. Since the issue involved in these appeals is common, they are taken up for disposal together. 3. Briefly stated common facts of the case are that the appellant is engaged in the manufacture of cotton yarn, blended yarn and man made fabrics falling under Chapter 52 and 55 of the Central Excise Tariff Act, 1985. The appellant is also registered under GTA Service. The appellant avails CENVAT credit on inputs, capital goods and input services. On verification of records of the appellants it was found that the appellant paid Service tax on outward transportation of finished goods through CENVAT credit. Proceedings were initiated against them on the ground that duty is required to be paid through PLA or cash on the outward transportation for GTA and not by CENVAT credit. The lower adjudicating authority confirmed the demand of Rs. 44,487/- along with interest and equal amount of penalty was also imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The appellants challenged the same. The learned Commissioner (Appeals) upheld the lower adjudicating authority’s orders. Hence these appeals. 4. The learned Advocate. Counsel submitted that the appellant is not simply a provider of output service but also a manufacturer of the excisable goods. The appellant further contended that till 28-2-2008 for the manufacture of final products the service of Goods Transport Agency remained an output service and, therefore, CENVAT credit was permissible to be utilized for payment of Service tax upto 28-2-2008. In support of their contention they placed reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of CCE, Chandigarh v. M/s. Nahar Industrial Enterprises Ltd., dated 6-5-2010 [2012 (25) S.T.R. 129 (P & H)]. They have also placed reliance on the Tribunal’s decisions in the case of Gimatex Industries Pvt. Ltd. v. CCE, Nagpur vide Order No. A/162/11/SMB/C-IV, dated 16-6-2011 and in the case of Commissioner of Service Tax, Mumbai v. Philips Engineering Corporation – 2010 (20) S.T.R. 692 (Tri.-Mum.). The learned Counsel has made alternate plea that since the issue involved is of interpretation of law and in view of various conflicting decisions in this case the penalty is not imposable. 5. On the other hand the learned JDR submitted that this issue is settled in view of the Tribunal’s decision in the case of M/s. ITC Ltd. v. CCE, Guntur – 2011-TIOL-568-CESTAT-BANG = 2011 (23) S.T.R. 41 (Tri. – Bang.) wherein it was held that “irrespective of period prior to 19-4-2006 or period after 19-4- 2006, the taxable service received by them, on which they were liable to pay Service tax as service recipient under the provisions of Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d) of the Service Tax Rules, 1994, could be treated as their ‘output service’ and service tax on the same was required to be paid in cash, not by utilizing Cenvat credit. With regard to Hon’ble Punjab & Haryana High Court decision in the case of M/s. Nahar Industrial Enterprises Ltd. (supra) the learned JDR submits that the period involved in the case in hand is beyond 18-4-2006 and which was not the case before the Hon’ble High Court of Punjab & Haryana. He also placed reliance on the Tribunal’s decision in the case of Iswari Spinning Mills v. CCE, Madurai – 2011 (22) S.T.R. 549 (Tri.-Chennai). 6.1 I have carefully considered the submissions and perused the records. The appellants paid service tax on the GTA services through CENVAT credit for the period from April, 2007 to March, 2008. With effect from 19-4-2006 the explanation to Rule 2(p) in Cenvat credit was deleted. The above facts are not in dispute. It is apt to quote here the decision cited by learned JDR in the case of M/s. ITC Ltd. (supra) wherein it was held that - “11. Thus, in respect of the persons providing some taxable output service/services and/or manufacturing dutiable final products, neither during the period prior to 19-4-2006 nor during the period w.e.f. 19-4-2006, the taxable service received by them, on which they were liable to pay Service tax as service recipient under the provisions of Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d) of the Service Tax Rules, 1994, could be treated as their ‘output service’ and service tax on the same was required to be paid in cash, not by utilizing CENVAT credit . As regards the category of persons neither providing any taxable service nor manufacturing any dutiable final products, to which the appellant belong, but liable to pay service tax on some taxable service received by them, as discussed above, while during the period w.e.f. 19-4-2006 such taxable service received by them can not be treated as their ‘output service”, during the period prior to 19-4-2006 while the taxable service received by them, on which they were liable to pay service tax, was deemed to be their “output service” by virtue of Explanation to Rule 2(p), they were still required to pay service tax on such deemed output service” through cash, not through CENVAT credit as discussed in para 8.1 above, without providing any taxable output service or manufacture of dutiable final products by them or other taxable services received by them. The duty paid goods received or other taxable service received by such person can not be deemed to be inputs and input services for his deemed output service.” 12. In view of the above discussion, to the extent the service tax on the GTA services received by the appellant was not paid in cash but was paid through CENVAT credit account, the same would be recoverable from them.” 6.2 Similarly the Tribunal in the case of Iswari Spinning Mills (supra) in para 8 has held that - 8. As regards the period beyond 18-4-2006, it has been stated by both sides that only a few of these appeals involve periods beyond 18-4-2006 also (from 19-4-2006 but prior to 1-3-2008, when the Service Tax Law was further amended). In respect of this period, a few of the learned counsels have argued that despite the deletion of Explanation to Rule 2(p) of the CENVAT credit on 19-4-2006, the manufacturer-assessees should be deemed as service providers in view of the legal provision imposing the burden of paying service tax on them for GTA service received by them, till the law was further amended on 1-3-2008. This contention is opposed by the Department. I find that all the decisions which are in favour of the assessee¬appellants/respondents have held them to be service providers for the period upto 18-4-2006 solely on the ground of the Explanation to the definition of output service under Rule 2(p). Hence, with the deletion of the Explanation with effect from 19-4-2006, the benefit of these decisions cannot be extended to them for the period from 19-4-2006. As far as the period beyond 18-4-2006 is concerned, the Tribunal in the case of Alstom Ltd. v. CCE – 2008 (12) S.T.R. 23 has also dealt with the issue for this period and has held in that case that the credit cannot be utilized for paying service tax for this period as well. As such, as far as the period beyond 18-4-2006 is concerned, I hold that the appellant/respondent-assessees are not entitled to utilize CENVAT credit for payment of service tax on GTA service and therefore, the duty demand and demand of interest are justified. However, considering the disputed nature of the issue, I hold that imposition of penalty in respect of the period from 19-4-2006 to 28-2-2008 is not justified and wherever penalties have been imposed, the same are set aside.” 6.3 From the above it follows that for the period beyond 18-4-2006 the appellant is not entitled to utilize CENVAT credit for payment of Service tax on GTA service. As far as decision of the Hon’ble High Court of Punjab and Haryana in the case of Nahar International Enterprises (supra) is concerned I find force in the contention of the learned JDR, that period involved in the said case was prior to 19-4-2006. Hence the same is not relevant to this case. As regard single member of this Tribunal in the case of Gimatex Industries Pvt. Ltd. is concerned the decisions of Tribunal in the case of ITC Ltd. and Iswari Spinning Mills (supra) were not before him. 7. In view of the above, I do not find any infirmity with the lower authorities concurrent findings regarding confirmation of demand and interest against the appellants. However, considering the dispute and the various conflicting decisions on the issue, imposition of penalty is not justifiable in this case. Appeals are disposed of in the above terms.