Service tax under Reverse Charge Mechanism on Goods Transport Agency (GTA)

'Goods Transport Agency (GTA)' means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

Generally, service tax is payable by the provider of Service. However in Reverse Charge Mechanism Service Receiver is made liable to pay service tax and comply with other provisions of Finance Act, 1994.

In case of GTA, a person liable to pay the freight for the transport of goods has also been made liable to pay service tax. In case, the person liable to pay freight is in a non-taxable area (Jammu & Kashmir), the person liable to pay service tax would become the service provider.

A provision exists in Service Tax which exempts the taxable service provided by a goods transport agency to a customer, from the whole of service tax, in such cases where,-

• The gross amount charged on consignments transported in a goods carriage does not exceed rupees one thousand five hundred or
• The gross amount charged on an individual consignment transported on a goods carriage does not exceed rupees seven hundred fifty. (An individual consignment refers to all the goods transported in a goods carriage for a single consignee.)

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;
• anybody 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.

The details of GTA service is given under notification no. 30/2012. According to this notification, every person liable to pay the service tax must pay it and abatement is to be considered. The abatement for GTA service as given under notification no. 8/2016-Service Tax dated 01.03.2016 as amended from time to time is:

Payment of Service Tax under Reverse Charge

a. Under General Charge Mechanism a service provider is required to get himself registered after the limit of Rs.9 Lakh taxable service is crossed. However under Reverse Charge Mechanism a person liable to pay service tax is required to get himself registered within 30 days of the date on which liability to pay service tax arises.

b. When person receiving service is liable to pay service tax under reverse charge, he is not entitled to exemption which is available to a small service provider. Thus, the service receiver is liable to pay service tax even if value of service of service provider is less than Rs. 10 Lakhs.

c. Timing of payment is same as that of Normal Charge Mechanism i.e. on monthly basis for companies and on quarterly basis for others. However there is a twist in manner of payment under reverse charge mechanism, the liability of service tax has to be met in cash i.e. no CENVAT credit can be adjusted against it (as credit facility is available for output services only while it will be input service for service receiver). (Rule 2(p) of CENVAT Credit Rules, 2004 (as amended by NN 28/2012-CE (NT) dt. 20-06-2012, the term output service means any service provided by SP located in taxable territory but shall not include a service; Specified in section 66D of the Finance Act, 1994, or Where whole of ST liability is of SR i.e. recipient of service.)

d. For service receiver who has paid service tax under reverse charge it is the service tax paid on the Input service. Hence CENVAT Credit is available but he will be eligible to avail credit, on the basis of GAR-7 challan i.e. on the date when service tax is paid.

e. The due date of filing service tax returns for first half of the year is 25th October and 25th April for the second half of the year.