goods transport agency
This query is : Resolved
19 October 2007
whether credit can be taken on service tax paid on freight when goods brought by transpoter are non cenvatablei..e. they are not used in production/mfg of final product.
19 October 2007
The very concept of giving credit for service tax or central excise duty is that the final product should be tax payable . The input credit can be adjusted or set off against the tax liability of the final product. It is a precondition.
Thus if the final product is an exempt one , the input credit is not claimable.
Thus if the final product is an exempt one , the input credit is not claimable.
19 October 2007
Cenvat Credit of Service Tax
Can the person paying service tax avail Cenvat credit of service tax paid by him ?
Consignor/consignee will be eligible if the service falls under the definition of ‘input service’ as defined in rule 2(l) of Cenvat Credit Rules, 2004. The invoice, bill or challan issued by goods transport agency will be a valid document to avail Cenvat credit.
Can I avail Cenvat credit on basis of TR-6 challan by which I have paid service tax ?
Since 16-6-2005, TR-6 challan has been made an eligible document to avail Cenvat credit.
Can we avail credit of service tax on transport charges paid by us ?
The service tax paid by you on good transport is obviously used in activities relating to business and hence, you can avail Cenvat credit on basis of invoice of GTA.
The definition of ‘input service’ as per rule 2(l) of Cenvat Credit Rules uses the words ‘outward transportation upto place of removal’. However, we incur expenses on outward freight from factory/depot also. Can we avail Cenvat of service tax paid on such freight ?
The words used in the definition of ‘input service’ in rule 2(l) are ‘activities relating to business, such as’. ‘Such as’ means all the examples given in the definition are only illustrative. They do not limit the definition. Use of words ‘upto place of removal’ does not mean that other transport charges are not allowable. Any service relating to your business will be ‘input service’ and will be eligible. Thus, outward freight even after place of removal will be eligible, as long as it is in relation to your business.
Who can avail credit of Service Tax paid by us on freight on finished excisable goods dispatched to our depots / stockyards? Is it the parent factory (Consignor) or the depots/stockyards (Consignee)? What is the document on which such credit can be availed?
If freight is paid in factory, consignor i.e. factory can avail Cenvat credit. If depot has paid service tax, it will have to register as 'Input Service Distributor' and then raise monthly invoice/challan on factory. Factory can avail Cenvat credit on basis of such invoice/challan. The depot will also have to register under Service Tax for purpose of payment of service tax.
Factory may apply to Commissioner for permission for central registration and payment of service tax under rule 4(3A) of Service Tax Rules. If such permission is obtained, the depot need not register under service tax provisions and need not pay service tax.
Whether service tax paid by the supplier on finished goods dispatched to their customers can be passed on to their customers; i.e. whether the service tax on Goods Transport Agency paid by the supplier can be collected from the customers separately? Is such collection permissible under Service Tax Act/Rules? Whether the element of Service Tax and Educational Cess can be indicated separately in the Rule 11 Invoice (prescribed under Central Excise Rules) for collection from customers?
There is no such provision. You cannot recover any amount representing service tax from your customer. This cannot be done as you are not ‘Goods Transport Agency’. However, Cenvat credit of service tax paid can be availed by you.
I have paid freight on behalf of my customer. Can I endorse the invoice of GTA, to enable my customer to take Cenvat credit ?
There is no such provision in law, though there is no specific prohibition. Note that as per rule 9(2) of Cenvat Credit Rules, credit cannot be denied even if name of user is not shown in the Invoice.
If you are risk taking and fighting type, you can legally do it. However, considering the way adjudication and appeal mechanism works in excise department, final success cannot be assured.
Hence, to avoid complications, it is advisable that you avail Cenvat credit yourself.
Can the person paying service tax avail Cenvat credit of service tax paid by him ?
Consignor/consignee will be eligible if the service falls under the definition of ‘input service’ as defined in rule 2(l) of Cenvat Credit Rules, 2004. The invoice, bill or challan issued by goods transport agency will be a valid document to avail Cenvat credit.
Can I avail Cenvat credit on basis of TR-6 challan by which I have paid service tax ?
Since 16-6-2005, TR-6 challan has been made an eligible document to avail Cenvat credit.
Can we avail credit of service tax on transport charges paid by us ?
The service tax paid by you on good transport is obviously used in activities relating to business and hence, you can avail Cenvat credit on basis of invoice of GTA.
The definition of ‘input service’ as per rule 2(l) of Cenvat Credit Rules uses the words ‘outward transportation upto place of removal’. However, we incur expenses on outward freight from factory/depot also. Can we avail Cenvat of service tax paid on such freight ?
The words used in the definition of ‘input service’ in rule 2(l) are ‘activities relating to business, such as’. ‘Such as’ means all the examples given in the definition are only illustrative. They do not limit the definition. Use of words ‘upto place of removal’ does not mean that other transport charges are not allowable. Any service relating to your business will be ‘input service’ and will be eligible. Thus, outward freight even after place of removal will be eligible, as long as it is in relation to your business.
Who can avail credit of Service Tax paid by us on freight on finished excisable goods dispatched to our depots / stockyards? Is it the parent factory (Consignor) or the depots/stockyards (Consignee)? What is the document on which such credit can be availed?
If freight is paid in factory, consignor i.e. factory can avail Cenvat credit. If depot has paid service tax, it will have to register as 'Input Service Distributor' and then raise monthly invoice/challan on factory. Factory can avail Cenvat credit on basis of such invoice/challan. The depot will also have to register under Service Tax for purpose of payment of service tax.
Factory may apply to Commissioner for permission for central registration and payment of service tax under rule 4(3A) of Service Tax Rules. If such permission is obtained, the depot need not register under service tax provisions and need not pay service tax.
Whether service tax paid by the supplier on finished goods dispatched to their customers can be passed on to their customers; i.e. whether the service tax on Goods Transport Agency paid by the supplier can be collected from the customers separately? Is such collection permissible under Service Tax Act/Rules? Whether the element of Service Tax and Educational Cess can be indicated separately in the Rule 11 Invoice (prescribed under Central Excise Rules) for collection from customers?
There is no such provision. You cannot recover any amount representing service tax from your customer. This cannot be done as you are not ‘Goods Transport Agency’. However, Cenvat credit of service tax paid can be availed by you.
I have paid freight on behalf of my customer. Can I endorse the invoice of GTA, to enable my customer to take Cenvat credit ?
There is no such provision in law, though there is no specific prohibition. Note that as per rule 9(2) of Cenvat Credit Rules, credit cannot be denied even if name of user is not shown in the Invoice.
If you are risk taking and fighting type, you can legally do it. However, considering the way adjudication and appeal mechanism works in excise department, final success cannot be assured.
Hence, to avoid complications, it is advisable that you avail Cenvat credit yourself.
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