Place of provision service rules, 2012 (Jammu)

[Guest]

Sir,

We arepaying freight payments from our corporate office(Location -Delhi) to transporter who are rendering GTA service in Jammu. My question is simple that whether we are liable to pay service tax under reverse charge mechanism.?

[KASTURI SETHI]

As per Rule 10 of Place of Provision Service Rules,2012 read with Rule 2(1)(d) of Service Tax Rules you are required to pay Service Tax on the amount of freight under GTA Service.

[Ganeshan Kalyani]

Yes I agree with Kasturi Sir.

[Akash Deep]

Dear Sir,

Before answering your query, I would like to draw your attention towards Rule 10 of POP, 2012. Rules 10 recognises two kinds of service namely service of transportation of goods and services of goods transport agency. i assume that you are aware of the differences between them and criteria prescribed under law to qualify a person as a GTA and his services as GTA services. I assume that, services received by you does qualify as GTA services only.

I further assume that "rendering GTA service in Jammu" means goods are destined in Jammu. and services are received by a body corporate.

Basis that. Rule 10 of POP provides that place of provision of such services shall be the location of the person liable to pay tax.

"Person liable to pay tax" in respect of GTA services has been define under Rule 2(1)(d)(B), Such Rule provides that in a situation where person liable to pay freight is either a factory or society or co-operative society or dealer of excisable goods or body corporate orpartnership firm, in this scenario, any person who pays freight or is liable to pay freight either himself or through his agent, shall be the person liable to pay tax. it may be noted that phrase "person who pays freight" does not mean that any third person who has nothing to do with the services, it simply means person paying freight has the liability to pay and discharging the liability on his own. it could be the situation where person liable to pay freight is not able to pay sch freight hence asked third person to pay freight. the third person shall never be liable to pay tax even though he pays the freight for the reason that third person was acting as an agent only to discharge the liability of his principle.

in this scenario, the fact that freight has been released by corporate office is of no use as the location of a body corporate is to be determined by its registered address.

So if the registered address of your establishment (i.e. body corporate) is within taxable territory, you shall be liable to pay tax.

if your establishment (a body corporate) is incorporated/registered in Jammu) ( irrespective of the fact corporate office is situated in Delhi) you are not liable to pay tax.

The question arise than who is liable to pay tax. As per the proviso, if the person liable to pay freight is located outside taxable territory, service provider i.e. GTA shall be liable to pay tax.

What if GTA is located outside taxable territory. in that scenario it would be a classic case of exempted services, where both service provider and service recipient both are locate in non taxable territory.

The whole point of such discussion is that it is not as simple as it looks. There are several factors which you have to keep in mind while determining tax liability in case of GTA services.

[KASTURI SETHI]

Sh.Akash Deep,

Sir, thanks a lot for novel ideas and additional information. I fully agree with you. Situations explained by you are required to be kept in mind.

[Guest]

Dear all,

I am agreed with your contention whatsoever you were shared with us.

But i would like to bring your notice to more on my question so that optimal answer could be conclude the same.

1.We have also branch in Jammu. (i.e. factory in Jammu).But GTA service is not rendering to the same.

2.GTA service performed in Jammu (i.e. Non-Taxability territory).It is directly concern to goods send to our stockiest (Distributorship).

3. Payment made to GTA by corporate office which is situated at Delhi .

I hope my question could be more clear to resolve the same.

[Ganeshan Kalyani]

Do you mean to say that service received is located in Jammu and also service provider is also located in Jammu and only payment is made from Delhi office. Then based on the explanation of Akash ji service tax will no be applicable on the condition that consignment note should have Jammu address. But as you said in point 1&2 it is not connected with your factory in Jammu so how will you be able to justify that service is received within Jammu. You need to judge by yourself based on the explanation given by the experts above. Thanks.

AI Summary

Place of provision for GTA services: tax liability follows the location of the person liable to pay tax. Under Rule 10 POP Rules read with Rule 2(1)(d)(B), the place of provision for GTA services is the location of the person liable to pay tax; the registered location of a body corporate receiving the service, not the location of the office making payment, determines tax liability. If the recipient is outside taxable territory, the proviso makes the GTA liable; if both provider and recipient are outside, the service is not taxable. Agent payments do not convert a third party into the person liable.