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Goods Transport Agency Services (GTA)

Ram kr. (Buisness) (883 Points)

05 April 2009

Dear Members,

As per service tax rule we have to pay service tax on 25% value of Transporter bill amount. After deposit this amount we take credit of this amount because our sale is transfer sale to our consignee agent. I have heard that any judgement is come in which we can pay these service tax amount in cenvat credit or service credit. Is it any judgement or rule. Pl. explain.

Thanks

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10 Replies

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 06 April 2009

Yes. The issue has been decided, GTA can be paid through Cenvat credit. The departmental specious argument that it is not an output service, and hence required to be paid through cash only has been rejected.

However, from 01.04.08, GTA service has been specifically declared not to be an output service for Cenvat Credit- and the issue is not clear in this context. If you pay GTA by cenvat, objection is certain based on this amendment.

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CMA KNVV Sri Vidya - Sri Kanth (C.A.Final (New) ICWAI FINAL (New)) (11269 Points)
Replied 06 April 2009

thanks rajesh ji

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 07 April 2009

Dear Vidya,

The P&H high court has decided that the credit till the place of cusotmer would be admissible. This decision is for the earlier defintion.

We have suggested to our clients that even post amendment there is a possibility of credit and have advised them to avail the credit and reverse under protest as the expenditure is related to business and certainly has moire of nexus to the service provided / goods sold than say accounting or audting or share issue.

Warm Regards

1 Like

Suresh Goel (servuce) (335 Points)
Replied 28 April 2009

now matter is crystal clear, payment of goods transport agency will be made through cash and no input tax credit is admissible.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 28 April 2009

How the matter has become so clear Suresh?

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ajay mohanty (finance manager) (29 Points)
Replied 29 April 2009

service tax on GTA is to be paid in cash only. since, there is abatement of 75%.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 30 April 2009

Well Ajay, merely because there is abatement does not mean service tax payment has to be in cash only and credit cannot be utilised for such payment. There are hundreds of partial exemption, and no such restriction is there at any place.

The fundamental issue is that cenvat credit can be utilised for payment of duty on "output services". The department was claiming earlier that although ST on GTA is paid by the company, it is not an "output service" of the company. Therefore credit cannot be utilised for such payment. This contention was rejected by the Tribunal.

Now, after 2008 budget, there is specific exclusion of GTA from the list of output services under Cenvat Credit Rules. Whether the earlier decision will be applicable after 2008 amendment?

atul gupta (proprieter) (97 Points)
Replied 30 April 2009

dear Madhukar N Hiregange sir,

as far as my knowledge P & H in Ambuja Cement has not decided about the payment of service tax liability, arising due to availement of services of GTA , through cenvat credit. It has decided that if excise duty has been paid on transport charges and property in goods has not been passed on till the goods reach buyers premises, credit on these goods can be availed. This is still possible. But after 2008 amendment it seems not possible to pay this liability from CENVAT credit.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 30 April 2009

(Experts from an unpublished paper.)

However, CBEC has also amended the definition of input service vide Central Excise Non-Tariff Notification No. 10/2008 dated 1st March 2008 wherein it was specified that credit is available till the point of removal.

The term place of removal has been defined as the place where the manufacturer is selling the goods, as per definition of place or removal as explained in explanation to the Section 4 of Central Excise Act. When the manufacturer is delivering the goods at the doorstep of the buyer, before transferring possession to the buyer, as per the definition of place of removal, the door step of the buyer becomes place of removal for the goods, and cenvat credit is allowed on GTA till the doorstep of the buyer.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 01 May 2009

Originally posted by :atul gupta
"	dear Madhukar N Hiregange sir, as far as my knowledge P & H in Ambuja Cement has not decided about the payment of service tax liability, arising due to availement of services of GTA , through cenvat credit. It has decided that if excise duty has been paid on transport charges and property in goods has not been passed on till the goods reach buyers premises, credit on these goods can be availed. This is still possible. But after 2008 amendment it seems not possible to pay this liability from CENVAT credit.	"

In my answer I have only talked about the possibility of credit availment.

You are right that the usage of the credits to pay the ST liability does not exist today as credit of input services cannot be utilsed for payment of input services liability.