Gta & reverse charge mechanism

This query is : Resolved 

07 December 2012

Dear Experts,

I understand that if a company avails the service of GTA service, it has to pay the service tax under Reverse Charge Mechanism, in this regard i have following queries

1. Can such company can avail the abatement of 75%?

2. if such abatement is availed and tax is paid in cash, can such paid amount again be utilised as credit?

3. if such GTA is not registered for ST (for any reason), will there be a liability on the company to pay ST under Reverse Charge Mechanism?

4. Say such company is a middleman and not the ultimate beneficiary of GTA service, will Reverse Charge Mechanism apply to the company?

CA Siddhartha Bhardwaj (Expert)
07 December 2012

1. Yes the company can avail abatement benefit.

2. CENVAT credit can also be claimed.

3. The liability of service provider and service recipient is independent of each other. The service recipient is liable to pay service tax under reverse charge even if the service provider is not liable.

Accordingly the company is liable to pay service tax even if the GTA is not registered.

4. If the invoice is in the name of the company, then the company is liable to pay service tax.

If the company is a middleman, it should ask the GTA to bill directly to the ultimate user and also collect the freight from such user.

@VaibhavJ (Expert)
07 December 2012


Nicely & ver well explained.


Rajendra (Querist)
07 December 2012

Thank you siddhartha,

in case of point no.4, if the company as a middleman keep its margin while billing to customer, can it pay the tax under reverse charge mechanism and later again pay the tax on re-billed amount by using the abatement (i. e is there a condition that to avail the abatement of 75%, he should be an actual transporter?)

CA Siddhartha Bhardwaj (Expert)
07 December 2012

It is not compulsory for the service recipient to be registered as a transporter.

The abatement benefit is available to all assessees.

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