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CA Raman Singla (Partner at Indirect Tax Professionals)     15 August 2014

Cenvat credit on gta service- a dilemma solved

Goods Transport Agency (GTA) service is a misconception since its inception. The light of mess ignites more with its coverage under reverse charge mechanism.

 

As per the provisions applicable for GTA Service,

  • This service is covered under Reverse Charge Mechanism; therefore, the service tax liability is to be paid by the service recipient that being a manufacturer or a Service provider.
  • There is an abatement of 75%, therefore the service tax liability is payable on 25% portion
  • This being an Input Service, the cenvat credit of this service is also available.

 

Now the general rule is that, the cenvat credit is not available when we are providing services availing the benefit of abatement. But this is applicable only on service provider and not on service recipient.

                            

Therefore, the cenvat credit of GTA service is available to a service recipient even though the service tax under reverse charge has been paid after claiming abatement of 75%.

 

However, the Central Excise and Service tax department were constantly taking a view that the cenvat credit is not available as the tax is paid after claiming abatement. Or the recipient has to get an undertaking from the provider that they have not claimed the abatement.

 

This issue is set at rest. A new Notification no 08/2014 applicable w.e.f. 11th July 2014 has been introduced.

 

The amendment clarifies that the condition for non- availment of credit is required to be satisfied by the service providers only. Service recipient will not be required to establish satisfaction of this condition by the service provider.

 

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 3 Replies

Manish K.Gandhi

Manish K.Gandhi (Superintendent)     20 November 2014

In fact in terms of Rule 2(p) of CCR , GTA is not Output service, hence cenvat credit can not be taken by transporter
CA Raman Singla

CA Raman Singla (Partner at Indirect Tax Professionals)     20 November 2014

Dear Manish, Rule 2(p) is applicable on service provider I.e. GTA and not on service recipient. Thus, this is surely an input service for manufacturer and accordingly cenvat credit can be taken
Manish K.Gandhi

Manish K.Gandhi (Superintendent)     20 November 2014

Resp. Ramanji, I understand. However in some CERA objection, SCN was issued alleging that as Factory is availing CENVAT credit, they have to pay 100% S.TAx(w/o abatement) so CBEC for further clarification added words "by the service provider" vide Notif. 8/2014 and in Budget D.O. letter it is clarified that service receiver is not required to establish non-availment of Cenvat Credit by transporter. Now, the question is in terms of Rule 2(p) of CCR transporter can not avail credit, then why such condition at Sr.7 of Table in Notif.26/2012-ST?


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