Service tax on GTA in Non-taxable territory

[Ganeshan Kalyani]

Sir, I would like to discuss on applicability of service tax on GTA availed in non-taxable territory.

A manufacturing unit is located in J&K (non-taxable territory). It has branches in across states (taxable territory). Manufacturing unit manufactures goods and for sale it has to be carried to states where it has depots. For this purpose, manufacturing unit arranges for freight and also pays the freight charges in J&K. The vehicle then moves to different states to deliver the goods to its own depots for sale.

Query: The service is availed in non-taxable territory, but goods are delivered to its own depot in other state. Since the unit to which the goods are delivered is also the same company, can department raise an issue that though freight is arranged in J&K but the receiving depots, being the same company should pay service tax on freight.

My view: service tax is liable to paid by the person paying freight. Here the unit in non-taxable territory has paid, hence no service tax.

Request to discuss on the issue. Thanks.

AI Summary

Applicability of Service Tax on Goods Transport from Non-Taxable to Taxable Territories under Reverse Charge Mechanism A discussion on the applicability of service tax on Goods Transport Agency (GTA) services availed in non-taxable territories, specifically Jammu & Kashmir, involved multiple participants. The primary issue was whether service tax is payable when a manufacturing unit in a non-taxable territory pays freight for goods transported to its depots in taxable territories. The consensus was that service tax is consumption-based and under the reverse charge mechanism (RCM), the liability typically falls on the service recipient in the taxable territory. Despite differing interpretations of the Service Tax Rules and Place of Provision of Services Rules, 2012, it was concluded that non-payment of service tax might invite litigation, as the department could view it as an attempt to evade tax. The discussion emphasized the importance of understanding the location of the person liable to pay tax and the potential for legal challenges if service tax is not appropriately accounted for.