Analysis of CBEC clarification on chargeability of Service tax on GTA

Background:

Goods Transport Agency (“GTA”) has been defined to mean any person who provides service to a person in relation to transport of goods by road and issues consignment note, by whatever name called. In addition to transportation services, GTA also provides various ancillary services such as loading/ unloading, packing/unpacking, transhipment, temporary storage etc., which are provided in the course of transportation of goods by road.

The All India Transport Welfare Association (AITWA) has represented regarding the difficulties being faced by the GTAs in respect of Service tax levy on the services of goods transport. Doubts have been raised by the All India Motor Transport Congress (AIMTC) regarding treatment given to various services provided by GTAs in the course of transportation of goods by road. The matter has now been clarified by the Central Board of Excise and Customs (“CBEC” or “the Board”).

CBEC Clarification:

The CBEC vide Circular No. 186/5/2015-ST dated October 5, 2015 has clarified the following:

• Various services provided by GTA in transportation of goods by road shall be treated as part of GTA service – The services provided by GTA is a composite service which may include various ancillary services such as loading/ unloading, packing/unpacking, transhipment, temporary storage etc., which are provided in the course of transportation of goods by road. These ancillary services may be provided by GTA himself or may be sub-contracted by the GTA.In either case, for the service provided, GTA issues a consignment note and the invoice issued by the GTA for providing the said service includes the value of ancillary services provided in the course of transportation of goods by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road.
  

• Single composite service need not be broken into its components and considered as separate services – A single composite service need not be broken into its components and considered as constituting separate services, if it is provided as such in the ordinary course of business. Thus, a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction.
  

• Abatement of 70% available to the entire composite services – The interpretation of specified descriptions of services in such cases shall be based on the principle of interpretation enumerated in Section 66F of the Finance Act, 1994 (“the Finance Act”). Thus, if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA, and not by any other person, such services would form part of GTA service, and, therefore, the abatement of 70%, presently applicable to GTA service (Rate of abatement was 75% for the period prior to April 1, 2015), would be available on it.
  

• 2 important conditions for applicability of Abatement Notification – It is also clarified that transportation of goods by road by a GTA, in cases where GTA undertakes to reach/deliver the goods at destination within a stipulated time, should be considered as ‘services of goods transport agency in relation to transportation of goods’ for the purpose of Notification No. 26/2012-ST dated June 20, 2012 (S. No. 7), so long as (a) the entire transportation of goods is by road; and (b) the GTA issues a consignment note, by whatever name called.