Service Tax on GTA on RCM

[TEJASWINI BELOSE]

My client(A) is hiring GTA (B) and providing services to its customers(C). But they(A) are claiming it as transport charges say ₹ 10,000 paid in profit and loss A/c. Also they are recovering the same including their commission of ₹ 15000 from its customers(C) and showing it under Sales in profit and Loss A/c and earning commission of ₹ 5000/- in the transaction. C is paying Service tax under RCM on ₹ 15000/-.Whether in this case B is also liable to pay service tax on RCM basis on ₹ 10,000/-??? Will this not lead to double taxation on part of B if C is paying service tax on entire ₹ 15000/-????

Read more at: http://www.caclubindia.com/forum/service-tax-on-gta-320489.asp#.VOXMOuEpqWA

[Mahir S]

You have to deposit 25 % service tax on transport charges paid for both inputs and outputs from your manufacturing unit, under abatement of service tax vide Notn No 26/2012 S.T.

[DR.MARIAPPAN GOVINDARAJAN]

Dear Sir,

This is the discussion forum in which specific queries are raised and the answers are shared as information among readers. Therefore the query should be specific but not in general. Please make this forum as a successful one.

[YAGAY andSUN]

Dear Tejaswini,

In addition to Mr. Naveed reply please also check the Notification 8/2014-ST in this regard. Further, we do endorse the views of 'Mariappan Govindarajan Sir'.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[TEJASWINI BELOSE]

Dear Sir,

My query was quite specific as follows,My client(A) is hiring GTA (B) and providing services to its customers(C). But they(A) are claiming it as transport charges say ₹ 10,000 paid in profit and loss A/c. Also they are recovering the same including their commission of ₹ 15000 from its customers(C) and showing it under Sales in profit and Loss A/c and earning commission of ₹ 5000/- in the transaction. C is paying Service tax under RCM on ₹ 15000/-.Whether in this case B is also liable to pay service tax on RCM basis on ₹ 10,000/-??? Will this not lead to double taxation on part of B if C is paying service tax on entire ₹ 15000/-????

As we hire services other GTAs to whom we as agents pay transportation charges and thereafter seek reimbursement from the respective clients for whom the transportation was arranged. We first books the transportation in our books on payment to the other GTA and thereafter charge the client for reimbursemet. Just because we booked the transportation expenses in our books, will it amount to us being considered as the service receiver (rather than the client)and consequently be liable to pay servic tax under the reverse charge mechanism??

My client(A) is hiring GTA (B) and providing services to its customers(C). But they(A) are claiming it as transport charges say ₹ 10,000 paid in profit and loss A/c. Also they are recovering the same including their commission of ₹ 15000 from its customers(C) and showing it under Sales in profit and Loss A/c and earning commission of ₹ 5000/- in the transaction. C is paying Service tax under RCM on ₹ 15000/-.Whether in this case B is also liable to pay service tax on RCM basis on ₹ 10,000/-??? Will this not lead to double taxation on part of B if C is paying service tax on entire ₹ 15000/-????

Read more at: http://www.caclubindia.com/experts/experts_display_list_by_category.asp?offset=3andcat_id=6andmode=open

AI Summary

Reverse charge on GTA services may cause duplicate tax liability when agents reimburse transport and recover charges. Whether payment and reimbursement of transport charges by an intermediary triggers separate service tax liability under the reverse charge mechanism is raised where the ultimate customer pays tax on the total amount. The issue focuses on whether the intermediary's booking and recovery of transport costs makes it the service recipient liable under RCM, risking overlapping tax, and notes commentators' advice to apply the notified abatement for transport services and to differentiate reimbursements from taxable services.