Service Tax on GTA on RCM

[TEJASWINI BELOSE]

Dear Sir,

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??

[PAWAN KUMAR]

Dear Belose Ji,

B is not liable for service tax at all. As per my view, as C has discharged the service tax liability because in case of freight either consignee or the consignor who pays the freight to GTA is liable for service tax. The actually liability of which who paid the freight to GTA which is A.

AI Summary

Reverse charge for GTA services: liability follows the person who pays freight, not the transport supplier. The advisory concludes that the GTA is not liable under service tax; under the reverse charge mechanism liability for GTA services rests on the person who actually pays the freight to the GTA, so recording and recovering transport costs does not by itself shift RCM liability away from the freight payer.