Service tax on good transport agency ( GTA) has been exempted fully for some time but after some time due to revenue loss the service has been made taxable again.In this post, you can get details explanation for each rule which touches GTA service.

9 important points on service tax on good transport agency ( GTA service):

  1. Good transport agency definition
  2. Consignment note imporance
  3. Exemption to GTA service under service tax
  4. Reverse charge mechanism in good transport agency service
  5. Abatement to good transport agency service
  6. Place of provision of service with regards to GTA
  7. Point of taxation of service rules
  8. Registration requirement for GTA
  9. Cenvat credit avaibility for GTA service

Good transport agency definition:

As per section 65B(26),

Good transport agency means

 “any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called”


Here we can part the definition and find important points:

  1. Any person : Means all the types of assessees are covered. Individual, HUF, company, AOP, BOI etc.
  2. in relation to : Means not only transportation activity of goods by road but other anciallary activities like loading, unloading, packing, unpacking, temporary warehousing are covered under GTA service if they are provided with relation to transportation of goods and not as independent activity. Benefit of it is that abatement is allowed to these services also.
  3. Consignment note : Most important point. Issue of consignment note is mandatory to conclude road transport as GTA service.

Consignment note:

As per explanation given under rule 4B of service tax rule, 1994,

Consignment note means

means a 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.

Don’t forget to issue consignment note if you want to avail abatement or exemption for good transport service.

Exemption to gta service under service tax:

Following exemption is available to good transport agency service under service tax:

Transportation of following is exempt from levy of service tax:

  1. Milk, salt, food grains including flours, pulses, rice. ( Updated budget 2015-effective from 1st April, 2015).
  2. Agricultural produce
  3. Good transport service for transport of export goods by road from place of removal to inland container depot, a container freight station, a port or airport, land customs station. Updated notification no. 4/2015-st.
  4. Defense or military equipment
  5. Cotton, ginned, bailed ( budget 2014 changes.)
  6. Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap
  7. Chemical fertilizer and oli cakes.
  8. Newspaper or magazine registered with registar of newspaper.

Agriculture produce definition as per service tax:

As per section 65B (5) of finance act, 1994, agriculture produce means

Any produce of agriculture on which either no further processing is done or such processing is done by cultivator or producer which does not alter its essential characteristic but makes it marketable for primary market.

Exemption based on consignment value:

As per mega exemption notification 25/2012-ST, there is exemption for low value consignment from levy of service tax:

  1. where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed Rs.1500; OR
  2. Where the gross amount charged for transportation of all such goods for a single consignee in the goods carriage is up to Rs. 750/-

Explanation:

  1. The first situation indicates exemption when total frient chared of all the consignments loaded in the truck is less than Rs. 1500.
  2. The second situation indicates exemption when single consignment freight does not exceed Rs. 750. This exemption is consignment wise.

TO determine taxability of consignment – point of view of GTA:

  1. First check total freight of consignments loaded in truck, if it is less than Rs. 1500, all the consignment in truck are exempt.
  2.  If it is more than Rs. 1500, we require to check single consignment freight, if it is less than Rs. 750, that single consignment is exempt.

To determine taxability of consignment – point of view of gta service receiver:

  1. First check freight value of signle consignment, if it is less than Rs. 750, it is exempt from service tax.
  2. If it is more than Rs. 750, ask GTA about total freight of consignments loaded in truck, if it is less than Rs. 1500, consignment mentioned in point 1 is exempt otherwise service tax liability will be arisen. Also get written proof from GTA about consignment freight of all the consignments loaded in truck.

Example:

Pranav is liable to pay following freight charges for GTA service.

TrucksFreight of 1 trucktotalConsignmentsFreight of 1 consignmentTotalTaxableTotal
15130019500No0
14160022400Yes22400
20050010000No0
5090045000Yes45000
Total Taxable value67400
Tax payable at 30%of 14=4.5%3033

 

 

Reverse charge mechanism in good transport agency service:

As per notification no. 30 (2012)-ST  entry no. (ii):

Reverse charge mechanism in good transport agency service is applicable when taxable service provided or agree to be provided by GTA in respect of transport of goods by road

where the person liable to pay freight is

  1. any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
  2. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;
  3. any co-operative society established by or under any law;
  4. any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under;
  5. any body corporate established, by or under any law ( COMPANY); or
  6. any partnership firm whether registered or not under any law including association of persons (AOP);

When individual or HUF is availing GTA service and paying freight, they are not liable to pay service tax under reverse charge mechanism and good transport agency is liable to pay service tax on freight by charging in bill.

Abatement to good transport agency service:

As per Notification no. 26/2012 amended with notification no. 8/2015-st,

This abatement is available to GTA and service receiver too. The rate is 70% of service charges ( freight charges). It means service tax is paid at 15*30 = 4.5% on bill. The condition to avail this abatement is cenvat credit on input, capital goods and input services should not be taken under cenvat credit rules, 2004.

*Rate after swachh bharat cess + Krishi Kalyan Cess

From 1/4/2016 as per budget 2016 update, 

For GTA, abatement on transport of used household goods is being rationalized with 60% abatement rate without availment of cenvat credit of inputs, input services and capital goods. For other goods, 70% abatement is available. 

 

 

Place of provision of service:

As per place of provision of service rule, 2012,

place of provision of service for good transport agency is the location of person liable to pay tax under rule 2(1)(d) of service tax rules, 1994.

As per rule 2(1)(d) of service tax,

when GTA service is provided and service tax is payable under reverse charge mechanism , the person liable to pay service tax is the person or his agent who pays the fright. His location will be place of provision of service.

However, when that person is located in non taxable territory ( jammu Kashmir and outside India), person liable to pay service tax is GTA itself.

GTA service providerService receiver ( Freight payer)Place of provisionPerson liable to pay service tax
MumbaiDelhi- CompanyDelhiCompany
MumbaiJammuJammuGTA
MumbaiNepalNepalGTA
MumbaiBhuj- IndividualBhujGTA

 

Point of taxation rules:

Point of taxation under reverse charge will be the date of payment when the payment is made within six months from date of invoice. Read this post for further clarification. http://taxmasala.in/point-of-taxation-rules-2011/

 

Cenvat Credit in GTA service:

Service tax paid under reverse charge mechanism for good transport agency service is available for cenvat credit utilisation if that service can be considered as input service as per cenvat credit rules.

Service tax registration for GTA service:

  1. Service provider is required to get service tax registration number if the taxable value of service provided during the year ( Excluding services on which service tax is payable by service receiver under RCM) exceeds Rs. 9 lakhs.
  2. Service receiver if liable to pay service tax under reverse charge mechanism should get registration irrespective of amount of service received.

Reference – service tax

CBEC clarification for ancillary service – circular no. 186/5/2015-st dated october 5,2015:

CBEC has clarified with circular no. 186/5/2015- ST that ancillary service like loading, unloading, packing, unpacking , transshipment, temporary storage etc. provided by GTA along with transport service are considered as composite service and abatement of 70% is allowed on these services. GTA is required to include those service in invoice.

 

I have tried to cover all the points related to service tax on good transport agency ( GTA service). Still if you have any questions, aks me through comments. Share this post to social media to encourage me to write more.