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Goods Transport Agency Services- Service wise Implications- GST India Guide

Goods Transport Agency Services

  • Understanding of the service

  • Section 65B (44) provides the definition of service as any activity carried out by a person for another for a consideration. The scope of the definition is very wide so as to cover wide range of activities under its ambit.Section 65B (26): “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;Section 65B (25): “goods” means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

  • Accounting codes

Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:

 

Tax Collection of Service Interest and penalties on such service
00440067 00440068

  • Taxability

From 1-7-2012, the term service is defined under section 65B (44) as an activity carried out by a person for another for a consideration. The scope of the definition is very wide so as to cover wide range of activities under its ambit. Therefore, from 1-7-2012, the transportation of goods by road will be a taxable service. Further, clause (p)(i)(A) of the section 66D of the Finance Act, 1994 specifically excludes service provided by goods transport agency from negative list. Services shall be taxable when provided by a goods transport agency to any person in relation to transport of goods by road in a goods carriage.

  • Provision relating to Negative List

Goods transportation agency services are not included in the Negative list as specified under section 66D of the Finance Act, 1994.

  • Provisions relating to exemptions

  1. General Exemption
  • Small Service Provider

Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.

  • Import of Technology

Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986. 

  • To Foreign Diplomatic missions and their personnel

Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.

  • Services by TBI or STEP

Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted

  • Services provided to SEZ

Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.

  1. Specific Exemption

The specific exemptions available in respect of goods transportation agency services are as follows:

  • Notificaiton No. 25/2012 exempts services provided by a Goods Transport Agency (“GTA”) by way of transportation of –

(a) agricultural produce;

(b) goods, where gross amount charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

(c) goods, where gross amount charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred fifty;

(d) milk, salt and food grain including flours, pulses and rice;

(e) chemical fertilizer, [organic manure] and oil cakes;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or

(h) defense or military equipment;

(i) cotton, ginned or baled.

  • Notificaiton No. 25/2012 exempts Services by way of giving on hire to a goods transport agency, a means of transportation of goods
  • Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from Service Tax vide notification No. 31/12-ST dated 20.6.2012. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).

Substituted by Notification No. 6/2015-ST dated 01.03.2015 w.e.f. 01.04.2015.  Prior to its substitution, Entry read as under:

“foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages”

Inserted vide Notification no. 6/2014-Service Tax dated 11/7/2014

Inserted vide Notification no. 6/2014-Service Tax dated 11/07/2014

  • Provisions relating to Valuation and Abatement

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.

In respect of Goods Transportation agency services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable Goods transportation agency services is to be determined in terms of provision of Section 67 read with the prescribed rules.

Notification No 26/2012-ST, provides an abatement of 75% of the gross amount charged for transport of goods by road in a goods carriage.

The above abatement has been reduced w.e.f. 01.04.2015 to 70%.

Further, w.e.f. 01-04-2016, abatement in case of Services of goods transport agency in relation to transportation of used household goods has been reduced to 60%. Therefore, in such a case, service tax is to be paid on the value of 40%.

  • Provisions relating to Cenvat Credit

In case of services provided by goods transport agency to person specified in rule 2(1)(d), the entire service tax is payable by the specified person. Therefore, services of goods transport agency cannot be considered as output service for the service provider. As per rule 3(1), the Cenvat credit is available when the inputs are used in providing the output service. In this case, the service provided by goods transport agency is not considered as output service. Hence, service provider providing the services of goods transport agency cannot take the credit of service tax paid on any input service.

However, when services are provided to the persons who are not specified in rule 2(1)(d), the service tax is payable by the service provider. The service provider in such case can take the credit of inputs and input services to the extent they are used for providing the output service of goods transport agency on which service provider has paid the tax. If the credit is taken, then, such service provider will not be eligible for abatement.

  • Provisions relating to point of taxation

The point of taxation in respect of services where the person liable to pay tax is the receipt of service will be governed by the Rule 7 of the Point of Taxation Rules, 2011. As per the said rules, the point of taxation for services notified under sub-section (2) of section 68 shall be the date on which the payment is made. Therefore, in case of service provided by GTA, the point of taxation will be the date on which the freight has been paid for transportation of goods to GTA.

However, where the person liable to pay service tax is the GTA itself, then, the Point of Taxation shall be determined as per the provisions of Rule 3 of the Point of Taxation Rules, 2011 and other applicable rules.

  • Provisions relating to Place of provision

The proviso to Rule 10 of Provision of service Rules, 2012 specifies that in the case where services of transportation of goods is provided by a goods transportation agency, the place of provision of such service will be the place where the person liable to pay tax, as determined in accordance with sub-rule 2(1)(d) of Service Tax Rules, 1994, is located.  Thus, place of performance in case of GTA is place where person liable to pay Service Tax is located.

  • Provisions relating to reverse charge

As per clause (2) of Notification No. 30/2012-ST, dated 20-6-2012, service tax in respect of services of transportation of goods by road provided by goods transport agency is payable by recipient of service where the consignee or consigner is any of the following:

  1. Any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
  2. 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;
  3. Any co-operative society established by or under any law;
  4. Any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;
  5. Any body corporate established, by or under any law; or
  6. Any partnership firm whether registered or not under any law including association of persons.

Para 2 of Notification No. 30/2012, dated 20-6-2012 provides that service tax is payable by the person who pays or is liable to pay freight by himself or through agent for transportation of goods by road in goods carriage located in taxable territory shall be treated as person who receives service for the purpose of this notification. Thus, the liability to pay service tax is upon the person who as per the contract is liable to pay the amount to the transporter. However, when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax.

If the payment is made by person other than mentioned above, the service tax is payable by provider of service.

  • Other Important aspect

Case Laws

  • In the case of Commissioner of Customs, Central Excise & Service Tax, Bhopal v. Maa Sharda Transport [2013] 33 taxmann.com 18 (New Delhi – CESTAT), it was held that filling of ash into bulkers/tankers for transport thereof is ancillary to transportation of goods and is not covered by Cargo Handling Services.
  • In the case of Commissioner of Customs, Central Excise & Service Tax, Siliguri v. Alkem Laboratories Ltd. [2013] 30 taxmann.com 185 (Kolkata – CESTAT), it was held that a recipient of goods transport agency’s services is eligible for abatement of 75 per cent on basis of a general declaration from service provider as to non-availment of credit. 
  • In the case of Birla Ready Mix v. Commissioner of Central Excise, Noida [2012] 28 taxmann.com 201 (New Delhi – CESTAT), it was held that hiring of “Transit Mixers” amounts to transfer of right to use such vehicles, which is a deemed sale and cannot be charged to service tax. Further, hiring of vehicles doesn’t amount to GTA service, as there is no transfer of custodial rights over goods to GTA and there is no need to issue consignment note.
  • In the case of Eastern Coalfields Ltd. v. Commissioner of Central Excise & Service Tax, Bolpur [2013] 32 taxmann.com 111 (Kolkata – CESTAT), it was held that a service recipient may claim 75% abatement from GTA services under reverse charge, even if consignment note doesn’t show non-availment of credit/exemption by GTA, but, a certificate issued by GTA is filed in that behalf.
  • In the case of Toshali Cements (P.) Ltd. v. Commissioner of Central Excise, Visakhapatnam [2012] 24 taxmann.com 236 (Bang. – CESTAT), assessee availed 75% abatement from gross value of goods transport agency’s services but failed to provide declarations from transporters that they had not availed CENVAT Credit, which was a condition attached to abatement. Since such declarations and other documents were furnished by assessee for first time before Tribunal, hence, matter was to be remanded back to adjudicating authority for decision afresh considering all documents produced by assesse.
  • In the case of Bazpur Co-operative Sugar Factory Ltd. v. Commissioner of Central Excise, Meerut-II [2012] 23 taxmann.com 428 (New Delhi – CESTAT), it was held that only persons issuing consignment notes are covered within ‘goods transport agency’ and therefore, individual truck owners who do not book cargo and issue consignment note in normal course of business are, prima facie, not goods transport agency and, accordingly, services provided by them are not liable to service tax.
  • In the case of Ajanta Paper Co. v. Commissioner of Central Excise, Delhi [2012] 24 taxmann.com 60 (New Delhi – CESTAT), it was held that to avail benefit of abatement under Notification No. 32/04-ST dated 3-12-2004 and 1/2006-ST, dated 1-3-2006, certificate given by transporter to the effect that he had not availed benefit of Cenvat credit and also benefit under Notification No. 12/03-ST, dated 20-6-2003, is sufficient and it was not mandatory that said declaration was to be made in each consignment note.
  • In the case of Kisan Sahkari Chini Mills Ltd. v. Commissioner of Central Excise, Meerut-II [2012] 25 taxmann.com194 (New Delhi – CESTAT), it was held that bullock cart drivers are not GTA service providers and Registration number of goods carriage is a mandatory particular in consignment note; accordingly, medium of transport like bullock carts having no registration number cannot be subjected to service tax.
  • In the case of Sandoz (P.) Ltd. v. Commissioner of Central Excise, Raigad [2012] 24 taxmann.com 258 (Mum. – CESTAT), assessee had paid service tax on goods transport services as recipient of services claiming abatement available under Notification No. 32/2004-ST. There was no endorsement on transport document that transporter had not availed CENVAT Credit of inputs/input services, which was a condition of availment of abatement. It was held that athough there was no endorsement that transport had not availed CENVAT Credit, however, it was implied that when transporter had not paid any service tax question of availment of CENVAT Credit by him didn’t arise. Thus, the abatement was available to assessee.
  • In the case of Commissioner of Central Excise v. Technical Associates Ltd. [2012] 19 taxmann.com 63 (All.), it was held that where transportation activity was an integral part of repair and maintenance contract and nothing was charged for same separately, no service tax could be demanded on same.
  • In the case of Commissioner of Service Tax, Ahmedabad v. Cadila Pharmaceuticals Ltd. [2012] 28 taxmann.com 38 (Guj.), it was held that circular providing condition that abatement in respect of GTA service is available only if GTA makes declaration that it has not availed CENVAT credit and exemption under Notification No. 12/2003-ST on consignment note itself, is bad in law since no such condition is provided for in abatement notification.

 

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