Reverse charge mechanism
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
29 June 2015
Dear Expert
I am working in Manufacturing unit. the company purchases Bran (Chokhar) from the market and paying freight on it. my question is whether company is liable to pay @ 30% of service tax under GTA. or is it exempt on the basis of exemption given on Wheat.
I am working in Manufacturing unit. the company purchases Bran (Chokhar) from the market and paying freight on it. my question is whether company is liable to pay @ 30% of service tax under GTA. or is it exempt on the basis of exemption given on Wheat.
29 June 2015
Hi,
If the company is paying transport charges to a Goods Transport Agency (GTA), then company is liable to pay service tax on 30% value (only when declaration for non availing cenvat credit by GTA is obtained). Else company is needs to pay service tax on 100% value.
If the company is paying transport charges to a Goods Transport Agency (GTA), then company is liable to pay service tax on 30% value (only when declaration for non availing cenvat credit by GTA is obtained). Else company is needs to pay service tax on 100% value.
29 June 2015
If bran qualifies as "agricultural produce", no need to pay service tax by anyone.
Querist : Anonymous
Querist :
Anonymous
(Querist)
01 August 2015
Thanks Mr. Srinu and Ankit.
Chokar means cattle feed or we can say comes under the scope of animal husbandry. is it exempt from service tax on tranportation? please give your view on this topic and let me know the interpretation of chokar under ambit of service tax.
Chokar means cattle feed or we can say comes under the scope of animal husbandry. is it exempt from service tax on tranportation? please give your view on this topic and let me know the interpretation of chokar under ambit of service tax.
22 July 2025
Here’s a detailed breakdown of the issue regarding Reverse Charge Mechanism (RCM) in relation to transportation of "bran" or "chokhar" and its exemption under service tax.
1. Reverse Charge Applicability for GTA Services
When a company receives Goods Transport Agency (GTA) services (for example, transportation of goods), the Reverse Charge Mechanism (RCM) might apply. Under RCM:
If the company (the recipient) is paying freight charges to the GTA, it may be liable to pay 30% of service tax (on the value of the transport service) under the reverse charge mechanism, provided the GTA has declared that they are not availing CENVAT credit.
If GTA doesn't declare that they’re not availing CENVAT credit, the full 100% of the service tax liability is on the company (recipient).
2. Exemption for Agricultural Products (Wheat, Bran, etc.)
Wheat, bran, and other agricultural products can qualify for exemption from service tax on transportation if they meet specific conditions.
Bran (Chokhar), as animal feed, is generally considered an agricultural product and can potentially be exempted from service tax on transportation under Notification No. 25/2012-ST (provided the goods are directly related to agricultural production or animal husbandry).
Chokhar (bran) can be exempted if it's used as cattle feed or in animal husbandry activities. However, it should be noted that exemption applies to the transportation of agricultural products and not on transportation of goods unrelated to agriculture.
3. Interpretation of "Bran" (Chokhar) Under Service Tax
Bran (also called chokhar), primarily used for animal feed, could fall under the category of agricultural produce depending on its use. It can be argued that chokhar is exempt from service tax if it qualifies as animal feed under agricultural products.
Exemption Reason: Animal feed is essential for animal husbandry (a key area under agriculture). The transport of such products can be exempt from service tax under Notification 25/2012.
Service Tax Exemption: If the transportation of chokhar is related to animal husbandry (used for cattle feed), it would likely be exempt from service tax under the relevant exemptions for agriculture.
Summary of Key Points:
Scenario Tax Applicability Key Exemption/Requirement
Company paying freight to GTA Reverse Charge mechanism applicable: 30% or 100% tax GTA should declare non-CENVAT credit availing; if not, full tax applies.
Bran (Chokhar) as animal feed Likely exempt from service tax under agriculture exemption If used as cattle feed or in animal husbandry, the transport may be exempt.
GTA transporting wheat/bran Exempt under Notification 25/2012-ST for agricultural products Applies if chokhar is used for agriculture/animal husbandry.
Conclusion:
If the bran (chokhar) is used for animal feed (i.e., related to animal husbandry), it is likely exempt from service tax on transportation.
The company should ensure that the GTA provides the correct declaration (for non-CENVAT credit) for Reverse Charge Mechanism and confirm if chokhar is exempt based on its agricultural usage.
1. Reverse Charge Applicability for GTA Services
When a company receives Goods Transport Agency (GTA) services (for example, transportation of goods), the Reverse Charge Mechanism (RCM) might apply. Under RCM:
If the company (the recipient) is paying freight charges to the GTA, it may be liable to pay 30% of service tax (on the value of the transport service) under the reverse charge mechanism, provided the GTA has declared that they are not availing CENVAT credit.
If GTA doesn't declare that they’re not availing CENVAT credit, the full 100% of the service tax liability is on the company (recipient).
2. Exemption for Agricultural Products (Wheat, Bran, etc.)
Wheat, bran, and other agricultural products can qualify for exemption from service tax on transportation if they meet specific conditions.
Bran (Chokhar), as animal feed, is generally considered an agricultural product and can potentially be exempted from service tax on transportation under Notification No. 25/2012-ST (provided the goods are directly related to agricultural production or animal husbandry).
Chokhar (bran) can be exempted if it's used as cattle feed or in animal husbandry activities. However, it should be noted that exemption applies to the transportation of agricultural products and not on transportation of goods unrelated to agriculture.
3. Interpretation of "Bran" (Chokhar) Under Service Tax
Bran (also called chokhar), primarily used for animal feed, could fall under the category of agricultural produce depending on its use. It can be argued that chokhar is exempt from service tax if it qualifies as animal feed under agricultural products.
Exemption Reason: Animal feed is essential for animal husbandry (a key area under agriculture). The transport of such products can be exempt from service tax under Notification 25/2012.
Service Tax Exemption: If the transportation of chokhar is related to animal husbandry (used for cattle feed), it would likely be exempt from service tax under the relevant exemptions for agriculture.
Summary of Key Points:
Scenario Tax Applicability Key Exemption/Requirement
Company paying freight to GTA Reverse Charge mechanism applicable: 30% or 100% tax GTA should declare non-CENVAT credit availing; if not, full tax applies.
Bran (Chokhar) as animal feed Likely exempt from service tax under agriculture exemption If used as cattle feed or in animal husbandry, the transport may be exempt.
GTA transporting wheat/bran Exempt under Notification 25/2012-ST for agricultural products Applies if chokhar is used for agriculture/animal husbandry.
Conclusion:
If the bran (chokhar) is used for animal feed (i.e., related to animal husbandry), it is likely exempt from service tax on transportation.
The company should ensure that the GTA provides the correct declaration (for non-CENVAT credit) for Reverse Charge Mechanism and confirm if chokhar is exempt based on its agricultural usage.
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