Registration

[MANASH MUKHERJEE]

A manufacturer of mineral water,who procures inputs like pet bottles from outside by paying freight is not yet been registered.Is he not liable to pay service tax on GTA.

[KASTURI SETHI]

Either Consignor or consignee has to pay service tax on freight. In case Goods Transporter Agency does not pay Service Tax on the amount of freight, the person who pays freight (consignee) has to pay Service Tax after abatement of 75% from the gross amount of freight. No small scale exemption under Notification No.33/12-ST dated 20.6.2012 is available in this service i.e.GTA. In case your consignor has not paid service tax on freight, you are liable to pay service tax. So you will have to get yourself registered under the category of GTA.(Section 65(105)(zzp).

[Rajagopalan Ranganathan]

Sir,

According to rule 2 (d) (B) of Service Tax Rules, 1994, in relation to service provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is,-

(I) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(II) 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;

(III) any co-operative society established by or under any law;

(IV) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder;

(V) any body corporate established, by or under any law; or

(VI) any partnership firm whether registered or not under any law including association of persons;

any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage:

If the consignor pays the service tax on GTA he cannot take the credit since he is not a provider of output service. If consignee pays the service tax on behalf of GTA as per above rule, the consignee can take credit of service tax paid by him since he receives the inputs for using the same in the manufacture of his final product. However the consignee has to register himself with Service Tax Department though he may not provide any output service and engaged in manufacturing activity only. This is the background of paying service tax on reverse charge mechanisam (RCM).

 

[Rajagopalan Ranganathan]

Sir,

In my reply posted on 24.9.2015 please insert the following between "1994" and "in relation" 'person liable for paying service tax is'. The error is regretted.

[Ganeshan Kalyani]

With due respect to Kasturi sir I would like mention here is that the abatement on GTA has been brought down from 75% to 70% w.e.f. 01.04.2015. Hence service tax liability would be on 30% of freight amount to be payable by the person paying freight.

[KASTURI SETHI]

Yes I agree with Sh.Kalyani Ji. Thanks for pointing out.

AI Summary

Reverse charge for goods transport services: consignor or consignee must pay service tax; consignee may claim input credit.
Reverse charge responsibility for goods transport services falls on either the consignor or the consignee who pays freight; if the GTA does not discharge service tax, the person paying freight is liable and no small scale exemption applies. Abatement is applied to the freight value for computing the taxable amount. A consignor who pays cannot claim input credit, while a consignee who pays may claim input tax credit when transport is an input for manufacturing, and must register for service tax even if not providing output services.