Input Credit on ST paid on GTA Service

[Paresh Jain]

Dear Members,

I have a client who is registered under the service category of GTA service in the capacity of service recipient.  Just wanted to clarify that he has no other output service.

I just wanted to know, whether he can get the credit of service tax paid on GTA service against the next months service tax liability.

[Ram Babu]

Dear Mr. Jain

Vide Notification 12/2008 ST Dt 01.03.2008 the goods transport agency service is being exempted from the payment of service tax unconditionally to the extent of 75% of the freight. Thus the service tax will be paid only 25% of the freight irrsepective of who pay the service tax. Consequently, benefit of CENVAT CREDIT has been WITHDRAWN to goods transport agency service by deleting the said service from the scope of output service in the cenvat credit rule 2004

razesh

[Brijesh Verma]

Dear Mr. Paresh Jain,

I feel that My Learned brother Razesh Ji has misunderstood your query insofar as he has gone to discuss the issue of a GTA itself. As per available info, it seems clear that your client is a service recipient and you want to know about availability of Cenvat Credit of tax paid by him on the GTA input service.

For this I would opine to the best of my limited knowledge, that the Cenvat Credit is very much available to your client but he cannot utilize the same in paying the tax on GTA Input service. As per law, the tax under reverse charge mechanism (such as GTA, foreign commission etc.) has to be paid in terms of money only and not by credit.

Off late there have been some judgments to the contrary which actually allow utilization of credit of GTA to pay tax on GTA itself later on, but I would not suggest the same to you.

[Snehal Kulkarni]

Mr Jain

I agree with the contention of Mr Brijesh Verma. The liability of Service Tax Payment is with the person WHO PAYS THE FREIGHT.

If your client is a manufacturer and paying the freight towards inbound and outbound carriage, then he has to pay the GTA by CASH only.

He can avail the Cenvat Credit on Inbound Freight without any doubt but on Outbound Freight, the matter is in dispute. He may take credit on Outbound carriage looking towards the scope of service.

This credit can be utlised towards the paymetn of Excise Duty.

 

 

 

 

AI Summary

Cenvat Credit on GTA services restricted; reverse charge tax requires cash payment, not credit by recipient. Notification 12/2008 exempted 75% of freight for GTA, leaving 25% taxable and led to deletion of GTA from output services for CENVAT purposes, withdrawing automatic credit. A service recipient may claim Cenvat Credit on GTA as an input service where attributable, but credit generally cannot be utilised to pay the GTA reverse charge tax, which is required to be discharged in cash; some judgments have permitted contrary treatment, while inbound freight credit is generally accepted and outbound freight credit remains disputed.