Goods Transport Agency

“With effect from 1.3.2008, taxable service in the nature of transport of goods by road services excluded from the definition of output service”

This express exclusion was introduced in order to specifically provide that Cenvat credit cannot be used to discharge service tax under the category ‘GTA’. In other words it should be paid other than thru Cenvat Credit account. (For example in Cash)

Because if GTA is considered as output service and if a manufacturer is allowed to pay the service tax on GTA through his accumulated Cenvat Credit and the same is once again availed as Cenvat Credit by him, then there is no revenue to the Government. Then it would be only a book exercise.

        

Please give me brief descripttion about above topic of Goods Transport Agency with proper example

 

 

 

Replies (1)

 

In the case of services provided for the transport of goods by road in a goods carriage, service tax is required 
to be paid by certain categories of persons who pay the freight instead of the service provider namely Goods 
Transport Agency. The actual amount of service tax payable is 25% of the amount of freight i.e. 75% of the 
amount of freight is provided as abatement, subject to the condition that no Cenvat credit of the duty paid has 
been availed of under Cenvat Credit Scheme. It has been represented that fulfillment of the condition of nonavailment of Cenvat credit by the service provider is, at times, difficult to prove, when the service tax is required 
to be paid not by the service provider but by the consignor or consignee who pays the freight. Taking into 
account the special nature of the goods transport agency (GTA) service, it is being exempted from the payment 
of service tax unconditionally to the extent of 75% of the freight. In other words, service tax is required to be 
paid only on 25% of the freight irrespective of who pays the service tax. Simultaneously, the benefit of Cenvat 
credit has been withdrawn to GTA service under Cenvat Credit scheme by deleting the said service from the 
scope of output service in the CENVAT Credit Rules, 2004. Henceforth, the person who is required to pay 
service tax under reverse charge method on GTA service can pay service tax on 25% of the freight 
unconditionally. Recipient of GTA service paying service tax under reverse charge method is no more required to 
prove non availment of CENVAT credit by the GTA service provider. 

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