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.
Dear Frnds.
As per my views for GTA paymnet, service receiver has to pay S.Tax on 25% amount of freight. no matter service provider is paying balance 75% or not. All responcibility is on service receiver sholder. EOU and SEZ units can take Refund of credit also after paying the same.. Hope i m correct of not please clear my mind.. Thanks a lot.
sir : service tax 750/ which date and 1500/- witch date
In mining activity services , whether iron Ore Transport within the mining area then pay service tax or not
Yes, you both are correct & infact all who knows GTA problem will definitely agree with your comments, but does not by our Government? why it is still relying on GTA ? why it is not clearing the confusion regarding GTA issues ? may this time they exclude will good enough. Isint it………..
Dear CA Gautam Joshi ji,
Issue is good. Govt is enjoying service tax receipts like any thing. No surprise that in the time to come It would be the biggest tax receipt source for CBDT than any other source. It is manifestly clear that concept of service tax on GTA and its realization mode lacks clarity. There are flaws in the system for which payer can not be held responsible. I completely agree that there are ample chances for awakening of so called silent controversies.
Secondly in the zonal there are a few entities who are organized are engaged in compliance seeking rebate/exemption and for unorganized small scale sector It is a puzzle. There are innumerable persons belonging to small sector even BPL who are victim of service tax unnecessarily on various daily needs commodities services prices of which are soaring up mainly because of service tax impact on TRANSPORTATION, LOADING UNLOADING HANDLING FORWARDING and allied service. It would be in the larger public interest as a measure to curb and control price hike and avoid levy which is creating havoc to abolish and omit the service tax wholly on these services.
Critical analysis and debate is required to exempt the Transportation and incidental services wholly from the ambit of service tax. Suggestion and comments are requested on the matter.
AK Bhargava , Katni