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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