GTA Liability ?
This query is : Resolved
17 May 2009
Dear All,
Please guide me for the following query :-
"A" is a manufacturer of goods and supplies to "B" who is a customer through "C" - an agent. The Invoice raised directly by A on B.
Howver, the freight is being paid by the C (Agent)- out of his commission, and he books the freight as expenses in his books of accounts .
"A"(consignor) & "B"(consignee) are not paying freight to the transporter.
"C" who pays the freight is neither a consignor nor consignee ? In such a case, who is liable to pay Service TAx ?
Please guide me for the following query :-
"A" is a manufacturer of goods and supplies to "B" who is a customer through "C" - an agent. The Invoice raised directly by A on B.
Howver, the freight is being paid by the C (Agent)- out of his commission, and he books the freight as expenses in his books of accounts .
"A"(consignor) & "B"(consignee) are not paying freight to the transporter.
"C" who pays the freight is neither a consignor nor consignee ? In such a case, who is liable to pay Service TAx ?
18 May 2009
Even the agent of consignor/consignee are covered for levy of service tax, therefore C will be liable to pay the service tax
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20 May 2009
Thanks Annapurna,
Can u guide me the rule / precedure under which "c" agent, who is paying Frieght out of his commission,is liable for servie tax ?
Regards
Suren
Thanks Annapurna,
Can u guide me the rule / precedure under which "c" agent, who is paying Frieght out of his commission,is liable for servie tax ?
Regards
Suren
28 May 2009
Rule 2(1)(d)(v)of Service Tax Rules, 1994
29 May 2009
The said rule 2(1)(d)(v)of Service Tax Rules, 1994 is applicable only those who pay freight charges, as consignor or consignee.
But in my situation the freight is being paid niether as consinor nor as consignee. The commission agent (Registered Partnership), who get sales commission, is paying freigh out of his commission as explained above.
IN SUCH CIRCUMTANCES, IS THERE ANY LIABILITY OF SERVICE TAX ARISES ?
But in my situation the freight is being paid niether as consinor nor as consignee. The commission agent (Registered Partnership), who get sales commission, is paying freigh out of his commission as explained above.
IN SUCH CIRCUMTANCES, IS THERE ANY LIABILITY OF SERVICE TAX ARISES ?
14 February 2010
The said rule 2(1)(d)(v)of Service Tax Rules, 1994 is applicable only those who pay freight charges, as consignor or consignee.
But in my situation the freight is being paid niether as consinor nor as consignee. The commission agent (Registered Partnership), who get sales commission, is paying freigh out of his commission as explained above.
IN SUCH CIRCUMTANCES, IS THERE ANY LIABILITY OF SERVICE TAX ARISES ?
But in my situation the freight is being paid niether as consinor nor as consignee. The commission agent (Registered Partnership), who get sales commission, is paying freigh out of his commission as explained above.
IN SUCH CIRCUMTANCES, IS THERE ANY LIABILITY OF SERVICE TAX ARISES ?
27 July 2024
In the situation described, where a commission agent pays the freight on behalf of the consignor and consignee, the liability for Service Tax on Goods Transport Agency (GTA) services can be complex. Let’s break down the key elements and applicable rules to determine the liability:
### **Scenario Breakdown**
- **A**: Manufacturer (consignor).
- **B**: Customer (consignee).
- **C**: Commission agent who pays the freight.
- **Freight Payment**: Made by C, not directly by A or B.
### **Service Tax Rules and Liability**
#### **1. Applicability of Service Tax on GTA Services**
Under the pre-GST Service Tax regime, the liability for service tax on GTA services was governed by the Service Tax Rules, particularly under the Reverse Charge Mechanism (RCM). The relevant provisions include:
#### **A. **Reverse Charge Mechanism (RCM)**
1. **General Rule (Service Tax Rule 2(1)(d))**:
- The recipient of the service (usually the consignor or consignee) is liable to pay service tax on GTA services. The service tax liability typically falls on the recipient of the transport service.
2. **In Your Case**:
- **C** (the commission agent) is neither the consignor nor the consignee but is paying the freight out of his commission. According to Rule 2(1)(d) of the Service Tax Rules, the recipient of the service (consignor or consignee) is responsible for paying the service tax.
#### **B. **Role of the Commission Agent (C)**
1. **Commission Agent's Liability**:
- In this case, **C** (the commission agent) is paying the freight, but this payment is made out of his commission and not directly by the consignor or consignee.
- **C** does not fall under the typical category of the recipient of the GTA service as defined under Rule 2(1)(d), where the liability is generally on the consignor or consignee.
2. **No Direct Liability**:
- Since **C** is paying freight on behalf of the consignor and consignee and is not the recipient of the service as per the definition, **C** may not have a direct liability for service tax under the standard rules. The liability typically remains with the actual consignor or consignee.
### **2. Service Tax Procedure and Rules**
#### **A. **Procedural Aspects**
1. **Invoice Details**:
- The transporter should issue an invoice to the person who is liable to pay service tax (consignor or consignee). If **C** is paying the freight, but **A** or **B** should ideally be liable, then **C** should ensure proper documentation and communication to avoid confusion.
2. **Handling the Payment**:
- **C** should ensure that the transport invoice clearly indicates whether service tax is payable and by whom. Since **C** is acting as an agent and paying out of commission, proper records and agreements should be in place.
3. **Documentation**:
- Ensure that the transport invoice and the payment documents are properly maintained to demonstrate the actual recipient of the service.
#### **B. **No Service Tax on C**
1. **Exemption**:
- If **C** is only paying the freight out of commission and not receiving the transport service directly, then **C** should not be liable to pay service tax on the GTA service directly.
2. **Service Tax Liability**:
- If there is a dispute or confusion, it's essential to clarify this with the tax authorities or consult with a tax advisor to ensure compliance. The liability typically would be on the consignor or consignee (A or B) and not on **C**, unless there is a specific agreement or arrangement stating otherwise.
### **Summary**
- **C** (the commission agent) is not liable for paying service tax on GTA services if **C** is not the recipient of the service according to the rules.
- The primary liability for service tax on GTA services usually rests with the consignor or consignee (A or B).
- Ensure proper documentation and agreements are in place to clarify the responsibility for service tax and maintain transparency in accounting practices.
**Recommendation**: Given the complexity of tax regulations, especially with shifting from Service Tax to GST, consulting with a tax professional or advisor would provide the most accurate guidance tailored to your specific situation. They can help navigate the intricacies of liability and ensure compliance with applicable tax laws.
### **Scenario Breakdown**
- **A**: Manufacturer (consignor).
- **B**: Customer (consignee).
- **C**: Commission agent who pays the freight.
- **Freight Payment**: Made by C, not directly by A or B.
### **Service Tax Rules and Liability**
#### **1. Applicability of Service Tax on GTA Services**
Under the pre-GST Service Tax regime, the liability for service tax on GTA services was governed by the Service Tax Rules, particularly under the Reverse Charge Mechanism (RCM). The relevant provisions include:
#### **A. **Reverse Charge Mechanism (RCM)**
1. **General Rule (Service Tax Rule 2(1)(d))**:
- The recipient of the service (usually the consignor or consignee) is liable to pay service tax on GTA services. The service tax liability typically falls on the recipient of the transport service.
2. **In Your Case**:
- **C** (the commission agent) is neither the consignor nor the consignee but is paying the freight out of his commission. According to Rule 2(1)(d) of the Service Tax Rules, the recipient of the service (consignor or consignee) is responsible for paying the service tax.
#### **B. **Role of the Commission Agent (C)**
1. **Commission Agent's Liability**:
- In this case, **C** (the commission agent) is paying the freight, but this payment is made out of his commission and not directly by the consignor or consignee.
- **C** does not fall under the typical category of the recipient of the GTA service as defined under Rule 2(1)(d), where the liability is generally on the consignor or consignee.
2. **No Direct Liability**:
- Since **C** is paying freight on behalf of the consignor and consignee and is not the recipient of the service as per the definition, **C** may not have a direct liability for service tax under the standard rules. The liability typically remains with the actual consignor or consignee.
### **2. Service Tax Procedure and Rules**
#### **A. **Procedural Aspects**
1. **Invoice Details**:
- The transporter should issue an invoice to the person who is liable to pay service tax (consignor or consignee). If **C** is paying the freight, but **A** or **B** should ideally be liable, then **C** should ensure proper documentation and communication to avoid confusion.
2. **Handling the Payment**:
- **C** should ensure that the transport invoice clearly indicates whether service tax is payable and by whom. Since **C** is acting as an agent and paying out of commission, proper records and agreements should be in place.
3. **Documentation**:
- Ensure that the transport invoice and the payment documents are properly maintained to demonstrate the actual recipient of the service.
#### **B. **No Service Tax on C**
1. **Exemption**:
- If **C** is only paying the freight out of commission and not receiving the transport service directly, then **C** should not be liable to pay service tax on the GTA service directly.
2. **Service Tax Liability**:
- If there is a dispute or confusion, it's essential to clarify this with the tax authorities or consult with a tax advisor to ensure compliance. The liability typically would be on the consignor or consignee (A or B) and not on **C**, unless there is a specific agreement or arrangement stating otherwise.
### **Summary**
- **C** (the commission agent) is not liable for paying service tax on GTA services if **C** is not the recipient of the service according to the rules.
- The primary liability for service tax on GTA services usually rests with the consignor or consignee (A or B).
- Ensure proper documentation and agreements are in place to clarify the responsibility for service tax and maintain transparency in accounting practices.
**Recommendation**: Given the complexity of tax regulations, especially with shifting from Service Tax to GST, consulting with a tax professional or advisor would provide the most accurate guidance tailored to your specific situation. They can help navigate the intricacies of liability and ensure compliance with applicable tax laws.
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