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Service tax under reverse charge mechanism on Goods Transport Agency (GTA)

The abatement for GTA service as given under notification no. 26/2012 Dated 20.06.2012 as amended from time to time is 70% and therefore 30% of service tax is liable to be paid. In fact, the abatement ratio has been amended vide notification no.8/2015 dated 1st March, 2015 and the change of abatement from 75% to 70% is w.e.f.1st April, 2015.

As per Finance Act 1994, ‘Goods Transport Agency (GTA)’ means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

The Finance Act, 1997 had levied Service Tax on Goods Transporter in 1997 which was subsequently withdrawn after nation-wide strike. Finally, levying service tax on Transport of Goods by Road is made w.e.f. 01.01.2005.

The GTA service is enumerated under reverse charge notification no. 30/2012 dated 20.06.2012. As per the notification, full service tax shall be paid by the person liable for paying service tax other than the service provider after considering abatement. The abatement for GTA service as given under notification no. 26/2012 Dated 20.06.2012 as amended from time to time is 70% and therefore 30% of service tax is liable to be paid. In fact, the abatement ratio has been amended vide notification no.8/2015 dated 1st March, 2015 and the change of abatement from 75% to 70% is w.e.f.1st April, 2015. The said abatement is eligible subject to the conditions as amended in the said notification. The extract of the condition is depicted below for reference –

‘CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.’

As per Service Tax Rules, 1994, the person who pays or is liable to pay freight, either himself or through his agent, for the transport of goods by road in a goods carriage, has been made liable to pay service tax. But, if the person liable to pay freight is located in non-taxable territory, then the person liable to pay service tax shall be the service provider.

A provision exists in Service Tax which exempts the taxable service provided by a goods transport agency to a customer, from the whole of service tax, in such cases where,-

  • the gross amount charged on consignments transported in a goods carriage does not exceed rupees on thousand five hundred or
  • the gross amount charged on an individual consignment transported on a goods carriage does not exceed rupees seven hundred fifty.

For the purpose of this provision, “an individual consignment” would mean all goods transported by a goods transport agency by road in a goods carriage for a consignee.

(The above article is authored by Ganeshan Kalyani and he can be reached via email on gganeshan.k@gmail.com)

Categories: Service Tax

View Comments (55)

  • if XYZ taking airfreight service from ABC & ABC raised bill without Service tax (RCM 4.5%) to XYZ then XYZ is labial to pay service tax (RCM 4.5%)?

  • sir mai ek truck owner hu mere pass agar truck available nhi hota tho mai kisi or transporter ka laga deta hu badle mai mujhe 1000 rs ka commission bhi milta hai kya mai soch rha hu ki wo commission exempt hai par mujhe koi notification nhi mil rha hai. please hepl me

  • sir i have rececived a service tax notice and difference they are tearting as a commision of me and gave me intimate to pay on service tax on it.
    I m not understanding that is not my commission .

    we are providing the transportation service by road and issuing consigment note to the party which act as transporter.

    we are not having any truck but from market through broker we arrange and supply to pvt. ltd. co. for transportation of there goods and tds will be deducted under sec.194c of me

    The payment received from party to me fully on my account and from that i paid to owner driver of truck.

    my question is that the diffence of margin is act as commision to me or not and i have fully authority to change my rate as per my accordingly.

    sholud i cover in defination of GTA (GOODS TRANSPORT AGENCY) by fulfillment of condition 1.

    whether differnce of margin act as commission on which service tax is liable.

    AS per sec. 68 REVERSE CHARGE MECHANISM TO ME AS I PROVIDE SERVICE TO PVT .CO.

    I received a notices from Service tax officer said that margin for me is commission and we are liable to pay servicce tax on it.

    AS per Intermediary defination by Rule 2(f) IT EXCULDED ME

    i only providing main service of transportation of good to service to consignor and consignee on my account as firm name.

  • HI,

    A registered dealer in Orissa is transporting good from orissa to UP and GTA is from MP. Now registered dealer need to pay tax on RCM basis and also use ITC. Which tax he will deduct CGST, SGST or IGST on RCM invoice?

    IF destination is not in UP but Orrisa than what will be the answer?

    If service provider is from orissa not from mp than what?

    • The person paying for GTA services will be the recipient of GTA services and the Location of the recipient will be the place of supply. Accordingly IGST will be applicable if goods are transported to UP and the UP party is paying for freight.

      If the recipient party is unregistered then GTA will collect 5% GST and the place of supply will be the location of the goods.

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