CA Gautam Joshi
Since inception year 1997, Goods Transport Agency (GTA) Service is caught by bundles of controversies like a celebrity always stay for the publicity stunt. Service Tax Legislation was just 3 years old and one can forget the childish introduction of GTA Service. However, even after sequential amendments the levy has ended up being a migraine for tax payers.
This article is meant to question should government continue levying service on GTA?
Following are the pains experienced by tax payers:
1. The service tax on GTA is on reverse charge mechanism. A charging mechanism where service providers (goods transport agencies) are showing all resistance to comply the law.
2. Without providing any services, a unit could be under the net of service tax just because it pays freight. All manufacturing concern having factories are undergoing this pain.
3. The only service then starts all the residual procedural aspects to be complied i.e. registration, collection, payment and returns. More painful would be when the service ends up unending litigations.
4. Payment of GTA Service effectively is @ 2.575% [(100 Rs. Freight-75% abatement)*10.30%]. However, payment is only required to be made in cash or bank. No CENVAT Credit can be used.
5. While paying the Service Tax on GTA, a bifurcation of inward freight and outward freight requires must as CENVAT Credit on outward freight is questionable at many courts.
6. GTA on inward freight is eligible for CENVAT Credit on the basis of GAR-7 challan. However, the same is nothing but an added cost for tax payers who don’t have any other services on which service tax is paid and so that the said liability can be squared off against CENVAT Credit of service tax paid on inward freight. Most of the manufacturers would be baring these added costs.
7. Additionally, GTA has number of exemptions and refunds apart from nominal levy of 2.575%.
Freight amount of Rs. 750 is excluded from Service Tax net and Rs. 1,500/- for more than one consignment. On the other side, exporters are exempted from service tax net under notification 18/2009 dated 07-07-2009. If exporters has paid service tax as input service, the same is refunded through notification 17/2009 dated 07-07-2009.
8. Imagine a worst-cum-worst situation where no service tax on GTA is paid and audit comes at place. Departmental authorities will put tax payer in defaulters for peanuts of service tax and enjoy huge amount of penalties i.e. late registration penalty, interest on late payment, late filling of returns etc.
9. There are silent controversies as well. There is a list of persons liable for GTA service tax if none is there Goods Transport Agency itself is liable to pay tax. The list itself is narrow. Concerns like Trusts, Association of Persons and LLPs are outside the purview.
The negative list of services has just been put on floor for comments from all industries and consultants. It would not be wrong to include GTA also at the par of negative list.
Either a clear mechanism of taxation or at least no tax at all is at most required.
Do you think #GST Council should provide option to Revise Form GSTR-3B?— Tax Guru (@taxguru_in) November 13, 2017
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