Tax payment

[Gopal B]

Dear Sir,

We are manufacturers and using own vehicles to deliver the material. After delivering the material we are carrying other party material and delivering the material at various points. shall we pay S.Tax on this or not.Vehicles are in the name of company.

[KASTURI SETHI]

Sh.Gopal Rao ji,

In this case, GTA service has been provided to another person for consideration by your factory registered under the Factory Act.Therefore, either Consignor or consignee who pays or is liable to pay the freight, will pay Service Tax on the amount of freight after abatement of 70% from the gross amount of freight. Reverse charge mechanism is applicable to GTA service under Notification No.30/12-ST dated 20.6.12 as amended.

Anyhow, Service Tax is required to be paid on the amount of freight as discussed above.

[Gopal B]

Thank you sir for your valuable reply

[Akash Deep]

Dear Sir,

I believe the transport sector is the trickiest one when it comes to opine on service tax liability. There are lot of ifs and buts before say tax in payable or not.

What is covered under reverse charge is services provided by a GTA by way of transport of goods by road where the person liable to pay freight is the person referred under I A(ii) of Notification No. 30/2012. GTA as defined is a person providing services in relation to transport of goods by road and issues consignment notes. Now courts have reached on unanimous decision held that issue of consignment note is a non-derogable condition. if any person who provide services in relation to transportation of goods by road but does not issue consignment note cannot be treated as GTA. A person engaged in transportation of goods by road but not in the capacity of GTA, his services would be covered under entry 2(p) of the negative list. what is a consignment note is given under Rule 4B of the ST Rules. Rule 4B provides for who shall issue a consignment note. As per Rule 4B any GTA engaged in transport of Goods by Road in a goods carriage shall issue a consignment note to the recipient of services. Here you will see incongruence between definition of GTA and Rule 4B. As per definition of GTA any person who transport goods by road and issue Consignment note shall be a GTA whereas Rule 4B provides that any GTA who transport goods by road in a goods carriage shall issue consignment note to the recipient of service. Rule 4B presuppose the service provider as GTA and then cast on him the liability to issue consignment note. I believe it is just a drafting error. Further, a textual reading of Rule 4B would suggest that any GTA who provides services in relation to transport of goods by road in a goods carriage shall issue consignment notes to the recipient of service. it means under rule 4B only those GTA are liable to issue consignment note who provide services in relation to transportation of goods by road in a goods carriage, in other words nature of vehicle used in transportation may also have significant on tax liability. If the vehicle used in not a goods carriage, such GTA (my doubts regarding use of term GTA in Rule 4B already been expressed) need not to issue consignment note and thus not acting as a GTA and no tax liability if he is engaged in actual transportation of goods.

Also refer to exemption provided under 25/2012 which are specific to goods transported by GTA.

Decide your tax liability after considering above discussion.

[KASTURI SETHI]

Agreed with Sh.Akash Deep, Expert that the issue is very trickiest and there are 'Ifs' and 'buts'. I intend to add that it is very important to go through the definition of 'Goods Transport Agency' as defined under erstwhile Section 65 (50b) and definition of 'consignment note'. In this context, Board's circular is also relevant regarding definitions of GTA and consignment note,which is appended below:

Levy on services of Goods Transport Agency Services (GTAs) - Clarifications- Circular No. 186/5/2015-S.T., dated 5-10-2015

[KASTURI SETHI]

Sh.Gopal Rao Ji,

In continuance of my reply dated 28.2.2016, I further add that in case a manufacturer plays the role of GTA for transporting the goods by road for delivery to an other person for consideration, the department will not be lenient at all. Regarding interpretation and analysis of Sections, Rules & Notifications I agree word for word with Sh.Akash Deep, an expert.

AI Summary

Goods Transport Agency service characterization determines reverse charge service tax liability when consignment notes are issued. Where a manufacturer transports goods for another person for consideration and issues consignment notes consistent with the statutory definition of Goods Transport Agency, the service attracts service tax under the reverse charge mechanism, with the consignor or consignee liable and the taxable value determined after applying the prescribed abatement to the gross freight. Determination depends on issuance of consignment notes, the nature of the vehicle as a goods carriage, and applicable notifications and circulars.