Service tax on GTA

[Murari Agrawal]

Dear Experts,

(1) We are removing goods upon payment of duty as well as on Job work. We are engaging local transporters from stands who do not issue any consignment note. Some of them issue bill on monthly basis giving details of each consignment and payment is made by cheque. Payment to some is made by cash against voucher. The amount of freight for individual consignments is between Rs. 700 to Rs. 1500.

(2) For Job work we are collecting the inputs from principal manufacturer and pay freight in the similar manner. We raise our bill for transportation charges. Some times, we pay less to the transporters than we collect.

(3) We are getting inputs from outside State. Transporter issues consignment note and the payment is made by us.

Kindly let us know our service tax liability in the above cases.

[Chintamani Bhide]

Mr. Agarwal,

as per the details given by you at sr. no. 1 in your query, since you are engaging local transporters who do not issue 'Consignment  Note', they can not be termed as 'GTA' and they are self-employed persons not acting as an Agency, you are not liable to pay service tax on the same. It was clarified by the  then FM while presenting the Budget in 2004 that it is not the intention to tax the individual truck owners/operators. They are not transport booking agents who wait for several consignments to make a truckload and issue consignment notes to individual consignors. The concept of Agency is taxable.

If the same methodology is applied at Sr. no. 2, then the answer would be same as above. However, if you are paying less to the transporter than what is recovered on account of Transport charges, then you will be earning a commission, which may be a taxable service provided by you and may be viewed as liable to tax, in my opinion.

In case of Sr. no. 3, since consignment note is involved and freight is paid by you, you will be liable to pay tax on abated value. The tax paid by you will be available as cenvat credit to you as it is for inward transportation of materials. The credit can be taken on the basis of GAR-7challan thru which the tax is paid.

AI Summary

No Service Tax on Local Transporters Without Consignment Notes; Commission Income May Be Taxable Under Certain Conditions. An individual inquired about their service tax liability concerning goods transportation. They use local transporters who don't issue consignment notes, pay them by cheque or cash, and sometimes pay less than what they charge for transportation. An expert clarified that since these transporters are self-employed and not acting as a Goods Transport Agency (GTA), no service tax is due. However, if the individual earns a commission from transportation charges, it may be taxable. For consignments involving consignment notes, service tax is applicable on the abated value, with the possibility of claiming cenvat credit.