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SERVICE TAX

SUBHASH CHANDRA TIWARY (CA IN SERVICE) (33 Points)

10 February 2011

Can a trader take Input on payment of Service tax made on Goods Transport agency, Please help and reply as soon as possible.

S. Tiwary

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3 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 10 February 2011

if the trader is liable to pay the service tax or excise then he can take input credit of service tax of GTA ( inward only), outward freight is not eligible for input credit.

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SUBHASH CHANDRA TIWARY (CA IN SERVICE) (33 Points)
Replied 11 February 2011

Dear Mr. Sharma ,

Thanks for your reply.

We are provider of Business auxilliary service under service tax act. We have also registered in service tax for port services and GTA for transportation of material . We are exporter of material and we used to bring the material in port and paying transportation charges. So the transportation is in the nature of Freight Inward only.

Now my question is as below-

1) Can we take credit of GTA and adjsut the same with output service tax liability of business auxilliary service.

2) can dept deny the credit and adjustment saying that the GTA was related to trading activity service.

3) IS there correlation require between input and output.

Please help and provide the provision of the law also by which we are allowed to take credit and adjsutment with Business auxilliary service.

Thanks & Best Regards

S. Tiwary

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 15 February 2011

To qualify as input sevice, the test is 1) the same is used for providing an output service or 2) setting up of facilities for providing the service or 3) used in relation to business. As per rule 6, if the service is used wholly in relation to exempted service, credit is denied. If partly used for exempted service and partly for taxable service , proportionate credit is allowed. Once credit is admitted as above, for utilisation of credit there is no one to one correlation between input service nd output service. If your GTA service is solely attributable to trading , credit seems to be ineligible although there are some CESTAT decisions that trading is not a service at all and hence outside the purview of rule 6.