Service Tax exposure on GTA

[MANOHAR KALBURGI]

Dear Sir/Madam,

We are proprietary firm and have received services from GTA and paid freight respectively. Since we are not covered in the above ‘specified category’, GTA should be liable pay service tax in this case. Who should be liable to pay service tax if GTA is unregistered?

Please provide me your valuable opinion this.

[Shilpi Jain]

Under service tax there was no RCM for procurements from unregistered persons. So if you are not falling strictly under the RCM entry no further liability for the service recipient.

Also under ST, the GTA is not liable to pay ST.

[Ganeshan Kalyani]

Notification 30/2012-Service Tax dated 20.06.2012 provided for list of service covered under RCM. For GTA, following conditions was given.

(A) (i) .....

(ii) 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,-

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

(b) 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;

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

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

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

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

A proprietary firm is not mentioned in the recipient list. Hence you are not liable to pay ST on GTA service received.

[KASTURI SETHI]

Relevant extract of Education Guide released by Board (effective from 1.7.12 when partial RCM was applicable)

10.1.3 If the service provider is exempted being a SSI (turnover less than ₹ 10 lakhs), how will the reverse charge mechanism work?

Ans. The liability of the service provider and service recipient are different and independent of each other. Thus in case the service provider is availing exemption owing to turnover being less than ₹ 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.

[KASTURI SETHI]

SH.MANOHAR KALBURGI Ji,

Re-examined the whole issue. Relevant extract of Board's Education Guide is applicable only if your firm is in the specified category. Your firm is not in the specified category so you are not required to pay Service Tax on the amount of freight paid by your firm as opined by Sh.Ganeshan Kalyani Ji. Proprietorship firm, being in unorganised sector is not covered under RCM (Notification No.30/12-ST dated 20.6.12).

Further, if GTA is unregistered by virtue of small scale exemption (or on some other factor), then consignor or consignee is required to pay Service Tax. If both consignor and consignee fall under unorganised sector, then GTA is liable to pay Service Tax. In this scenario, if Consignor falls under the specified category, Consignor will pay ST on the amount of freight. If both consignor and consignee fall under unorganised sector (out of specified categories), GTA is required to pay Service Tax under Forward Charge Mechanism. GTA will have to verify the status of consignor and consignee whether they are covered under specified categories or not.

Now GTA can also avail small scale exemption of ₹ 10 lakhs depending upon turnover in the preceding year.If GTA is entitled to avail small scale exemption, he will not pay ST under FCM.

So in this scenario, it is presumed that GTA is unregistred because of availing small scale exemption. He will not pay ST. Your firm is not in specified category. You will not pay tax.

Now liability to pay ST is on Consignor (if that person is covered under one of the specified categories.)

So to be on safer side, your duty is only to verify the status of Consignor and keep it on record with you as documentary evidence in order to avoid any future complication, if any arises.

[RAMASWAMY Advocate]

sir, you have stated in your query that your a proprietor ship concern and have not specified your nature of business whether you are manufacturer or dealer of excisable goods etc., However, if you are any one of the categories specified in the notification mentioned by the expert, in my view you are liable to pay service tax under RCM.

[KASTURI SETHI]

Sh.Ramaswamy Ji,

Sir, I fully agree with you but Sh.Manohar Kalburgi Ji is well conversant with the condition of 'specified categories'. No need to go in detail.

[MANOHAR KALBURGI]

Thank you all for your valuable opinion.

To continue the discussion, to confirm that the GTA is registered under Service Tax but he has not collected any ST either from service given to registered person or unregistered person.

Now question arises that;

1. Service given to registered person is liable for RCM and recipient will discharge the service tax

2. Service given to unregistered person by GTA(registered under Service Tax)under service tax, whether GTA still liable to pay ST on this or this also gets exempted?

[KASTURI SETHI]

Dear Sir,

With the change of question, the whole scenario is changed. Was initial query hypothetical one or were you not aware of full facts ?

[Shilpi Jain]

In case RCM provisions attract the recipient will have to take registration and discharge the service tax liability? The service provider is not liable to service tax

[KASTURI SETHI]

.

In Service Tax, a person who pays the freight (actually bears the freight), is liable to pay ST on the amount of freight, (may be consignor or consignee). If both consignor and consignee do not fall under the specified categories and GTA is registered , ST is to be paid by GTA under FCM. Preference-wise liability is

1.Consignor

2.Consignee

3.GTA

AI Summary

Reverse charge liability for goods transport services may fall on consignor or consignee; GTA pays if neither qualified. Liability for service tax on GTA services turns on whether the recipient is within the notification's specified categories; specified recipients must pay under the reverse charge mechanism, while proprietary firms not listed are not liable. If GTA is unregistered due to small scale exemption, consignor then consignee are liable in priority; if neither are specified recipients the GTA pays under the forward charge. Registered recipients must register and discharge tax under reverse charge where applicable, and parties should verify and document consignor/consignee status.