Reverse charge for gta service
This query is : Resolved
27 March 2013
If i am a company receiving GTA services from another company. will i be liable to pay service tax under reverse charge mechanism?
{is GTA SERVICES (PROVIDED BY A COMPANY) COVERED UNDER REVERSE CHARGE MECHANISM ?}
{is GTA SERVICES (PROVIDED BY A COMPANY) COVERED UNDER REVERSE CHARGE MECHANISM ?}
27 March 2013
Yes, RCM is applicable for GTA services even if Service Provider is a company.
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27 March 2013
Thank you sir,
can you please give me a notifiation or circular referance.
can you please give me a notifiation or circular referance.
27 March 2013
30/2012 dated 20th June 2012
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27 March 2013
30/2012 dated 20th June 2012
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27 March 2013
here is the wording of notification
"(ii) 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,—
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b) 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;
(c) any co-operative society established by or under any law;
(d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons"
But notification does not specify service provider. it is given regarding service receiver. or should we assume that notification is silent on service provider and it is assumed that all catagories of service provider will be covered.
"(ii) 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,—
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b) 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;
(c) any co-operative society established by or under any law;
(d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons"
But notification does not specify service provider. it is given regarding service receiver. or should we assume that notification is silent on service provider and it is assumed that all catagories of service provider will be covered.
27 March 2013
You are right.If service receiver are above mentioned person, RCM is be applicable.
27 March 2013
but what about service provider?
i have one case where company(recepient co.) is not paying service tax under RCM saying the service provider is a company (corporate) since it is not applicable.
i have one case where company(recepient co.) is not paying service tax under RCM saying the service provider is a company (corporate) since it is not applicable.
27 March 2013
In case of GTA service, if the person paying freight is the specified person(i.e. consignor or consignee), then reverse charge shall apply. It is not alwayz the consigner who pays the freight but, sometimes the consignee is also liable to pay teh freight(as agreed between parties), then in that case, if the consignee is not amongst the specified persons, then RCM shall noe apply.
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27 March 2013
As per notification 30/2012 service provider liability is NIL (see "II" in notification).
27 March 2013
Thanks Sumit,
I know that the consignor or consignee whoever bears the freight cost will be liable to pay service tax under RCM.
My doubt is when the service provider is a body corporate whether RCM will apply. And the body corporate need not charege ST in its bill.
I know that the consignor or consignee whoever bears the freight cost will be liable to pay service tax under RCM.
My doubt is when the service provider is a body corporate whether RCM will apply. And the body corporate need not charege ST in its bill.
27 March 2013
Let me give u an example, suppose XYZ Pvt Ltd Company hires a GTA(Company/non-company) for supplying goods to Mr. A(individual), and the agreement is executed in such a way that the freight is payable by Mr. A directly to GTA, so in this case, no RCM shall apply, even though consignor was a companny but the person liable to pay freight was an individual(i.e. none of the specified person)
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27 March 2013
Thanks Sumit,
As per example given by you,
It means we are XYZ Pvt Ltd. and we hires GTA which is a company ( for e.g. DHL)and the frieght charges bare by us then in such case we have to pay ST under RCM.
As per example given by you,
It means we are XYZ Pvt Ltd. and we hires GTA which is a company ( for e.g. DHL)and the frieght charges bare by us then in such case we have to pay ST under RCM.
27 March 2013
Also,
If every time XYZ ltd bares the Freight cost then they have to pay ST under RCM.
But in my case GTA is charging ST in their bill and XYZ ltd is paying the same to GTA.
we want to suggest XYZ that, insted of paying ST to GTA pay it under RCM directly.
so what should we consider before suggesting to XYZ ltd ?
If every time XYZ ltd bares the Freight cost then they have to pay ST under RCM.
But in my case GTA is charging ST in their bill and XYZ ltd is paying the same to GTA.
we want to suggest XYZ that, insted of paying ST to GTA pay it under RCM directly.
so what should we consider before suggesting to XYZ ltd ?
28 March 2013
Also,
If every time XYZ ltd bares the Freight cost then they have to pay ST under RCM.
But in my case GTA is charging ST in their bill and XYZ ltd is paying the same to GTA.
we want to suggest XYZ that, insted of paying ST to GTA pay it under RCM directly.
so what should we consider before suggesting to XYZ ltd ?
If every time XYZ ltd bares the Freight cost then they have to pay ST under RCM.
But in my case GTA is charging ST in their bill and XYZ ltd is paying the same to GTA.
we want to suggest XYZ that, insted of paying ST to GTA pay it under RCM directly.
so what should we consider before suggesting to XYZ ltd ?
22 July 2025
Great question! Here’s a detailed explanation regarding Reverse Charge Mechanism (RCM) for Goods Transport Agency (GTA) services under service tax law (pre-GST context, as your references are from that period):
1. Is RCM applicable if the GTA service provider is a company?
Yes, RCM applies irrespective of whether the GTA is a company or not.
The key factor is who is liable to pay the freight.
If the freight payer (consignor or consignee) is a specified person (like a factory, society, dealer of excisable goods, body corporate, etc. as per Notification 30/2012-ST dated 20 June 2012), then RCM applies on them, and service provider (GTA) need not charge service tax in their invoice.
The notification clearly states the liability to pay service tax lies with the service receiver (the specified person).
2. When GTA charges service tax in their bill and the recipient pays to GTA:
If GTA has charged service tax and deposited it, and you have paid it to GTA, the service receiver has technically fulfilled their service tax liability.
However, under the law, it is the service receiver who is liable to pay service tax under RCM.
The correct procedure would be:
GTA should not charge service tax if the receiver is liable under RCM.
The receiver should pay service tax directly to the government under RCM.
Paying tax to GTA and then GTA paying to government can create issues of mismatch, credit denial, and scrutiny.
3. If you want to suggest XYZ Ltd to pay service tax under RCM instead of paying GTA (with service tax):
Before advising this, consider the following:
Contract terms: The contract/agreement between XYZ Ltd and GTA should specify that the GTA will raise invoice without service tax, and the tax liability will be discharged by XYZ Ltd under RCM.
Input Tax Credit (ITC): If XYZ Ltd pays tax under RCM, they can avail ITC (subject to rules). This might be more efficient than paying tax to GTA and claiming ITC from GTA’s invoice.
Compliance burden: XYZ Ltd will have to comply with RCM provisions — timely payment of service tax, filing returns properly reflecting RCM payments.
Avoid double taxation: Ensure GTA is not charging service tax in invoices; otherwise, double tax payment may occur.
Audit and documentation: XYZ Ltd should keep documents evidencing proper tax payments and correspondence with GTA regarding invoicing and tax liability.
4. Summary:
Situation Who pays Service Tax? Invoice Treatment Remarks
GTA service to specified person Service recipient (RCM applies) GTA should issue invoice without service tax; recipient pays tax under RCM GTA need not charge service tax if RCM applies
GTA charges service tax in invoice Service recipient has paid tax Recipient has paid tax to GTA; GTA deposits it No separate payment under RCM required if properly done
Service recipient wants to pay under RCM Service recipient Invoice without service tax Better compliance and ITC handling
Reference:
Notification No. 30/2012-ST dated 20.06.2012
Clause II of the notification clarifies RCM applicability for GTA services.
1. Is RCM applicable if the GTA service provider is a company?
Yes, RCM applies irrespective of whether the GTA is a company or not.
The key factor is who is liable to pay the freight.
If the freight payer (consignor or consignee) is a specified person (like a factory, society, dealer of excisable goods, body corporate, etc. as per Notification 30/2012-ST dated 20 June 2012), then RCM applies on them, and service provider (GTA) need not charge service tax in their invoice.
The notification clearly states the liability to pay service tax lies with the service receiver (the specified person).
2. When GTA charges service tax in their bill and the recipient pays to GTA:
If GTA has charged service tax and deposited it, and you have paid it to GTA, the service receiver has technically fulfilled their service tax liability.
However, under the law, it is the service receiver who is liable to pay service tax under RCM.
The correct procedure would be:
GTA should not charge service tax if the receiver is liable under RCM.
The receiver should pay service tax directly to the government under RCM.
Paying tax to GTA and then GTA paying to government can create issues of mismatch, credit denial, and scrutiny.
3. If you want to suggest XYZ Ltd to pay service tax under RCM instead of paying GTA (with service tax):
Before advising this, consider the following:
Contract terms: The contract/agreement between XYZ Ltd and GTA should specify that the GTA will raise invoice without service tax, and the tax liability will be discharged by XYZ Ltd under RCM.
Input Tax Credit (ITC): If XYZ Ltd pays tax under RCM, they can avail ITC (subject to rules). This might be more efficient than paying tax to GTA and claiming ITC from GTA’s invoice.
Compliance burden: XYZ Ltd will have to comply with RCM provisions — timely payment of service tax, filing returns properly reflecting RCM payments.
Avoid double taxation: Ensure GTA is not charging service tax in invoices; otherwise, double tax payment may occur.
Audit and documentation: XYZ Ltd should keep documents evidencing proper tax payments and correspondence with GTA regarding invoicing and tax liability.
4. Summary:
Situation Who pays Service Tax? Invoice Treatment Remarks
GTA service to specified person Service recipient (RCM applies) GTA should issue invoice without service tax; recipient pays tax under RCM GTA need not charge service tax if RCM applies
GTA charges service tax in invoice Service recipient has paid tax Recipient has paid tax to GTA; GTA deposits it No separate payment under RCM required if properly done
Service recipient wants to pay under RCM Service recipient Invoice without service tax Better compliance and ITC handling
Reference:
Notification No. 30/2012-ST dated 20.06.2012
Clause II of the notification clarifies RCM applicability for GTA services.
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