Gta service

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 November 2013 In case of GTA Service - service Tax is payable by consignor or consignee whoever pay the freight provided consignor or consignee is a specified person.
But I am confused regarding Reverse Charge law, as it defines that if the person paid freight is specified person ,he will be liable to pay tax. What if, consignor is specified person but freight is paid by consignee who is not specified person.
Now, who will be liable to pay service tax?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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08 November 2013 The concept of 'specified person' with relation to GTA Service is an old concept that is not applicabe now.

Much before, almost 13 years, the phrase 'Reverse Charge Mechanism' was coined, Reverse Charge Payment was being levied on GTA services. The Supreme Court had in Laghu Udyog Bharati vs Union of India [(1999) 112 ELT 365(SC)] held that the provisions of Finance Act 1994 as it then stood does not empower the government to transfer the liability for payment of ST from the service provider to the service recipient.

Sections 116 & 117 of Finance Act 2000 and Section 158 of Finance Act 2003 amended the charging section itself so that the liability could be transferred to the service recipient.

The definition of service recipient in the initial stages comprised of seven categories including factories registered under Excise Act, incorporated, bodies, etc. These service recipients were called specified persons.

Subsequently probably by Finance Act 2007 the definition of the GTA service was amended and the term specified person was replaced by any person. However, corresponding amendments were not made in all places and the words 'specified persons' continued in the statute.

When the reverse charge was re-explained, the specified person here is the service recipient, i.e the consignee. For RCM it is the consignee who is responsible for payment of GTA, whereas under the old Section 65(105) the liability was either on the consignor or consignee.

Querist : Anonymous

Querist : Anonymous (Querist)

08 November 2013 It means that in case of GTA service service tax is paid by Consignee only when he is specified person and he is making the payment of freight.
In case consignee is not specified person, GTA will be liable to pay service tax?

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Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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10 November 2013 Under the definition of GTA, the consignee is automatically the specified person if the goods are transported by road on issuance of a consignment note by the transporter and the value of transportation of the consignment is in excess of Rs.1,500/-.

Since the consignee, in every case, is the recipient of the goods, he cannot claim he is not the specified person, since he is a person who has availed of the services of the transporter, irrespective of who pays the bill.