Aditya Singhania & Nischal Agarwal

An Insight into History of Goods Transport Agency

Service Tax was first introduced on Goods Transport Operator (GTO) services with effect from 16-11-1997. However, due to several oppositions from the truck associations, the levy of service tax on the same was withdrawn with effect from 02-06-1998. Since the magnitude of revenue loss from the withdrawal of service tax on transport services by road became so high that the Ministry of Finance once again introduced the tax on Goods Transport Agency (GTA) Services with effect from 01-01-2005.

With the re-introduction of service tax on transportation services by road, the incidence of tax has been shifted from Goods Transport Operator (GTO) to Goods Transport Agency (GTA). In fact a very thin linedistinction can be drawn between the two, which can be noted from the Budget Speech dated 08-07-2004 delivered by Hon’ble Finance Minister, Shri P.Chidambaram which reads:

the tax would be only on transport booking agents and there is no intention to levy service tax on truck owners or truck operators”

Goods Transport Agency – Definition

It would be pertinent to note that Clause (p) of Section 66D (Negative List) specifies transportation of goods by road except when provided by GTA as a Non-Taxable service. It means that only service provided by GTA is taxable. Now the question arises as to what technically is a Goods Transport Agency. Goods Transport Agency as defined u/s 65B(26) of Finance Act,1994 introduced with effect from 01-07-2012 means:

  • Any person;
  • that provides service ‘in relation to’;
  • transport of goods by road; &
  • issues consignment note.

It may be noted that the definition uses the word “means” which makes the definition restrictive and exhaustive. As defined above, the aforementioned points are the mandatory ingredients for the purpose of levy of service tax on GTA. Besides the phrase used in the definition ‘in relation to’ has extended the scope of GTA, which includes various intermediary and ancillary services such as loading, unloading, packing, unpacking, transhipment, temporary warehousing and is to be treated as part of GTA service for the successful provision of the principal service. Further, it needs to be mentioned that any service which has a direct or indirect connection with a specified service has to be treated as ‘in relation to’ that specific service. The aforesaid can be affirmed from the decision laid down by Hon’ble Supreme Court in the case of Doypack Systems (P) Ltd. vs. Union of India 1998(36)ELT 201(SC).

Moreover, any person who is the owner of trucks or arranges the trucks by hiring them and provides transportation service cannot be termed as GTA. In addition to this, a GTA must have a direct contract with consignor/consignee and receive freight from consignor/consignee.

Now the question which puts many minds into dilemma is the issue pertaining to consignment note. What actually is it? Let us have a brief analysis on it.

Consignment Note

Generally, when a person deposits the goods with any transporter for the purpose of transport to a given destination, the transporter issues the lorry receipt or consignment note to the person depositing the goods. The name of the consignee is mentioned on such note. The original copy of the lorry receipt is sent by the person depositing the goodsi.e consignor to the consignee to enable him to collect the goods from the transporter.

Further, it has been made mandatory for every GTA to issue consignment note to the receiver of service under Rule 4B of Service Tax (Fifth Amendment) Rules, 2004. It would be pertinent to note that the failure to issue consignment note would merely be a violation of law but will not discharge the service receiver from paying his liability.The aforesaid can be affirmed from the case of Bharati Soap Works v CCE [2008]13 STT 196.

Liability to pay Service Tax

When the taxable service is provided by GTA to an individual, HUF, sole proprietorship or an unregistered partnership firm, then it is the GTA who is liable to pay service tax on the taxable value of the services provided. However, as per Clause (2) of Notification No. 30/2012 – ST dated 20-06-2012, 100% liability (popularly known as, Complete Reverse Charge Mechanism) to pay service tax has been shifted from service provider to service receiversubject to the condition that the service receiver must belong to any of the specified categories which includes factory(registered under Factories Act,1948), company, registered corporation, registered society, registered body corporate or a registered partnership firm.

Now, the common question which arises is that whether the threshold limit of INR 10 lacs needs to be considered, in case the liability to pay service tax falls on service receiver. In this connection, it would be pertinent to note that the threshold exemption of INR 10 lacs under Notification No. 33/2012–ST is made available only to service provider and not to service recipient. The service receiver is liable to pay service tax under Reverse Charge Mechanism.

Abatement/ value-based exemption in Value

An abatement of 75% of gross amount charged is permitted for determining the value on which tax is payable. In simple words, as per entry no. 7 of Notification No. 26/2012 – ST dated 20-06-2012, the service tax is payable for services provided by GTA on 25% of gross amount charged. But one needs to be cautious that if abatement of 75% is availed then CENVAT credit on inputs, capital goods and input services is prohibited if used for providing output service.

Besides abatement, it would be relevant to note that certain value based exemptions have also been inserted vide Item No. 21 of Notification No. 25/2012-ST dated 20-06-2012 which grants full exemption under two circumstances namely (i) where the gross amount charged on goods transported in a single goods carriage does not exceed INR 1500; & (ii) where the gross amount charged for transportation on a consignment of all such goods for a single consignee does not exceed INR 750.

Questions

Consignor Ltd., a public limited company, engaged in manufacturing of excisable goods arranges for the transportation of goods from Goods Transport Agency to the Consignee Ltd. The GTA charges a consideration of INR 10000 from Consignee Ltd.

What will be the amount of service tax & who shall be liable to pay service tax?

Since both the consignor & consignee falls under the specified category, the liability to pay service tax falls on consignor or consignee whoever pays freight or is liable to pay freight. In the instant case, as the freight is paid by the consignee, the liability to pay service tax also falls on consignee under the Reverse Charge Mechanism by availing an abatement of 75% on the gross amount charged by the GTA. It is pertinent to note that the Consignee will have to mandatorily take registration of GTA Services and pay service tax & accordingly file the half yearly return in Form ST-3. Service Tax payable by Consignee = INR 309 (10000*25%*12.36%)

What if the consideration is reimbursed to the consignor from the consignee?

It may be noted that generally the freight is paid by the person who is the recipient of goods. However, in some cases, when the goods are sold on Free on Board (FOB) basis, it is the consignor who pays the freight. In this regards, it is relevant to note that in M/s Sumangalam Suitings Pvt. Ltd. & Others vs. CCE, the Hon’ble Tribunal has held that if the consignor has engaged a GTA for delivery of goods to the consignee, it cannot be contended that the consignee is liable to pay service tax, even if the consignee would have reimbursed freight charges to the consignor. Service Tax payable by Consignor = INR 309 (10000*25%*12.36%)

What if the Consignor/Consignee (liable to pay) is an individual, proprietorship firm, or unregistered partnership firm?

If the consignor/consignee is an individual, proprietorship firm or unregistered partnership firm, then the liability to pay service tax falls on service provider i.e. GTA subject to the condition that threshold limit of INR 10 Lacs must have exceeded. The GTA may not claim CENVAT credit of inputs and input services in case it claims abatement. Service Tax payable by GTA = INR 309 (10000*25%*12.36%).

Cenvat Credit on GTA Services

Rule 2(l) of the Cenvat Credit Rules, 2004 defines Input Services as “inward transportation of inputs or capital goods and outward transportation upto place of removal”.It would be relevant to note that if the manufacturer utilizes the services of GTA for inward transportation, then without giving any second thought to other things, the manufacturer can avail the CENVAT credit of service tax paid on GTA. But the doubt may arise in case of Outward freight. Is CENVAT credit allowed on outward transportation?

From the afore-mentioned definition of Input service, it is crystal clear that outward transportation upto place of removal is eligible for credit. Here, emphasis should be placed on the phrase “up to the place of removal”. Now, one may question that when can outward transportation is to be treated as input service?In this regard, Circular No. 97/8/2007 dated 23rd August, 2007 may be referred wherein it is stated that if the following three conditions are satisfied then only outward transportation is to be treated as input service, which are mentioned here-in-below:

(i)                 The ownership is with the seller till the doorstep of the buyer;

(ii)               The seller shall bear the risk of loss or damage during transit; &

(iii)             The freight charges were integral part of the price.

And accordingly by satisfying the aforesaid conditions, a manufacturer paying the service tax on GTA service can avail the CENVAT credit on outward transportation.

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26 responses to “A brief note on Goods Transport Agency (GTA) Service”

  1. sayali sawant says:

    Outward supply transportation charges GST payment is liability of supplier but again same transport bill GST paid under RCM in mandetroy to not to pay.

  2. Mohit says:

    what is condition if goods found with not proper bills or fake bills……….

  3. hemant garg says:

    i m providing gta service should i show services which i gave on reverese chagre basis in the return. if yes then where . becasue on that services i not pay any service tax to govt . on that service service reciver is liable to pay services

  4. NN JHA says:

    we are service receiver of container corporation of india, where service tax charged as by amendment rate on vessel services (Freight charges container one port to another port in india). We are eligible for cenvat credit of service tax as service receiver. please advice us- REGARDS-NJ

  5. CA SUDHIR GOYAL says:

    Tax when consignment note issued. Simple transport of goods service (without issue of consignment note) is not a GTA service.

    ¨ Person liable to freight is liable to pay service tax on GTA if he is body corporate, factory, registered dealer under Central excise, society, cooperative society, partnership firm (registered or not).

    ¨ Tax on 30% if GTA does not avail Cenvat Credit w.e.f. 1-4-2015 (earlier it was 25%)

    ¨ GTA is liable to pay service tax if (a) person liable to pay freight is individual or HUF (b) Person liable to ay freight is outside taxable territory (like J&K, Nepal, Bhutan, Bangla Desh, Pakistan etc.).

    Pls check whether you are body corporate, factory, registered dealer under Central excise, society, cooperative society, partnership firm (registered or not).

  6. CA SUDHIR GOYAL says:

    Who pay feight is liable to pay service tax under RCM.

  7. CA SUDHIR GOYAL says:

    IF it is eligible input service and having valid invoice or payment challan of service tax- you can avail credit

  8. CA SUDHIR GOYAL says:

    IF it is eligible input service and having valid invoice or payment challan of service tax- you can avail credit.

  9. CA SUDHIR GOYAL says:

    You may ask him Consignment note for transportation of goods.

    As per Section 65B(26) of the Finance Act, 1994; “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”. Therefore, issue of Consignment Note (C/N) is integral and mandatory requirement before any road transport can be said to be GTA.
    Most Important to note:- Consignment Note is not defined in the Act. As per Rule 4B of Service Tax Rules, 1994; consignment note may be any document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.

    Tax when consignment note issued. Simple transport of goods service (without issue of consignment note) is not a GTA service.

    ¨ Person liable to freight is liable to pay service tax on GTA if he is body corporate, factory, registered dealer under Central excise, society, cooperative society, partnership firm (registered or not).

    ¨ Tax on 30% if GTA does not avail Cenvat Credit w.e.f. 1-4-2015 (earlier it was 25%)

    ¨ GTA is liable to pay service tax if (a) person liable to pay freight is individual or HUF (b) Person liable to ay freight is outside taxable territory (like J&K, Nepal, Bhutan, Bangla Desh, Pakistan etc.).

    No service tax if consignment note not issued. Simple transport Bill is not ‘consignment note’

  10. Shrutika Lakhani says:

    what if after the tranportation the consignee refuses to accept the good and the consigner also refuses to take back the good. can the transporter sell the goods? who will pay the sales tax on sale of such goods by transporter who is not a registered dealer of goods?

  11. ABHIJIT GUHA says:

    many thanks for your valuable cooperation.another problem i’m facing is carriage outward paid by us on daily basis to a truck owner owing 5 trucks for 7-8 trip per day.he does not make any consignment note as he is not registered as a GTA but regularly raises a bill to us for his dues .so,should we deduct service tax from his payment ? please suggest me as early as possible.
    warm regards,

    Abhijit Guha
    9804970973

  12. Ezhilarasasn says:

    We are private limited company who is responsible of service tax against Freight charges

  13. Ezhilarasasn says:

    We are private limited who is responsible of service tax against Freight charges

  14. ABHIJIT GUHA says:

    we are a registered manufacturing partnership firm of fruit products.we are registered on June 2015 for transport of goods by road / gta as a service receiver and we pay the freight as carriage inwards.my urgent query is,
    1) who is liable to pay service tax ?
    2) when transporters send us consignment note charging service tax to pay freight then which amount we should pay to the transporter as freight ( incl/excl st ) & who will finally pay the service tax to the government.
    plz send me the solution as this is most URGENT.
    —– ABHIJIT GUHA

    • Aditya Singhania says:

      Dear Mr Guha,

      Since your partnership firm is registered, so the liability to pay service tax falls on the partnership firm in the capacity of service receiver under Reverse charge mechanism. Besides only the amount of freight (excl of service tax) needs to paid to the GTA.

      Hope the same may adhere to your need !

  15. K C Bera says:

    Are the consignee eligible for cenvat credit of service tax , if the consignor reimburse the service tax on GTA paid by them from consignee.

  16. Deepak says:

    My Question is that, when a GTA Company is not levied a service tax on his bills. then what are the tax implication is to be done by as a service receiver company.
    I also want to know that, if we paid the service tax under reverse charge mechanism on taxable value i.e. 25% than can we also take the input of service tax paid.
    kindly assist me.
    Thanking You.

  17. sushil soni says:

    sir,
    We would like to now, How Liable to pay service tax which when service received for goods transfer to one business place to Another business Place.

    Accountant
    Eastern Minerals
    Mob. 09993922156
    Mail Id – Sushilswarnkar@gmail.com

  18. vikas singh says:

    if the goods transport agency has charged service tax then it is payable by consinor or not

  19. Shidhin says:

    Sir,
    I want to start a Goods Transport Agency in Kerala.
    Kindly tell me the legal formalities for that.

    Regards,

    T.P.Shidhin

  20. Mousam Mukherjee says:

    Kindly Solve my problem… We have paid Rs.30 lacs to our transporter as advance for transportation charges. And did agreement with them to deduct the amount of advance in every month in 5 equal installments from their monthly bills.
    Say, if in any month transporter raised bill to us Rs.15 lacs, then we deduct Rs.6 lacs from their bill and paid the balance amount. So, what will be the tax implication on that. How will we pay the GTA Service Tax ?
    We paid the advance in October 2014.
    Please advice on urgent basis.

    Waiting for prompt reply please.

  21. Mahesh says:

    Is it necessary to generate Lorry Receipt?Suppose supplier hands over the goods by accompanying the trailer or truck then can he write LR details field “By Hand” or Hand delivery.

  22. MN Hegde says:

    Sir,

    Advance licence should be taken before despatch of goods( Export goods weather it may be physical export or deemed export). CT-3 should be taken before despatch of goods to 100% EOU. You have to prepare ARE-3 and send it along with goods and get the endorse copy of ARE-3 attested by warehouse officer at customer end within 90 days from the date of dispatch. In case of courier Bill of entry, signature of courier and seal is enough in the copy of bill of entry to claim cenvat credit.

    regards,
    MN Hegde
    9880034019

  23. MN Hegde says:

    Sir,

    Advance licence should be taken before despatch of goods( Export goods weather it may be physical export or deemed export). CT-3 should be taken before despatch of goods to 100% EOU. You have to prepare ARE-3 and send it along with goods and get the endorse copy of ARE-3 attested by warehouse officer at customer end within 90 days from the date of dispatch. In case of courier Bill of entry, signature of courier and seal is enough in the copy of invoice to claim cenvat credit.

    regards,
    MN Hegde
    9880034019

  24. P.V.MANIKANTAN says:

    Sir

    We would like to know the detailed DEEMED EXPORT procedure

    1) Advance license is same as per normal procedure for deemed exports or anything specifically mentioned in the licenses

    2) For deemed exports, how to proceed with Advance license, CT-3 form, and Form- H ? At what stage , these documents are required ? Who is responsible for each of the above said documents ?

    Your prompt reply will be highly appreciated

    With warm regards,

    P.V.Manikantan
    ( Asst.Manager – Materials )
    h/p: 7708068791

    REVATHI EQUIPMENT LIMITED
    Pollachi Road, Coimbatore – 641021
    Tel: 0422-2610851 / 6655100 / 2610566 / 2610322
    Fax: 0422-2610427 / 6655199
    E-mail: manikantan@revathi.in / website: http://www.revathi.co.in

  25. P.V.MANIKANTAN says:

    Sir

    We would like to know, how to claim CVD for combined bill of entries raised against courier mode

    Your immediate reply will be highly appreciated

    With warm regards,

    P.V.Manikantan
    ( Asst.Manager – Materials )
    h/p: 7708068791

    REVATHI EQUIPMENT LIMITED
    Pollachi Road, Coimbatore – 641021
    Tel: 0422-2610851 / 6655100 / 2610566 / 2610322
    Fax: 0422-2610427 / 6655199
    E-mail: manikantan@revathi.in

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