Service Tax exemption for goods carriage to GTA

Central Government has issued notification No.29/2008-Service Tax, dated 26.06.2008 to exempt fully from levy of service tax on supply of transport vehicles (goods carriage) to a goods transport agency (GTA) to be used for transport of goods by road [section 65(105)(zzzzj) of the Finance Act, 1994].

Representations have been received from the All India Confederation of Goods Vehicle Owners’ Associations and also from the All India Motor Transport Congress requesting to provide relief on account of levy of service tax on supply of goods carriage to GTA for use in transport of goods. It has been stated that GTAs often provide services in relation to transportation of goods by road using the goods carriage obtained on rent or hire basis. The relief has been sought on various grounds inter alia that the service tax paid on renting / hiring of goods carriage, without right of possession and effective control, could not be taken as input credit for payment of service tax towards GTA service.

Services provided by a GTA in relation to transportation of goods is leviable to service tax under GTA service [section 65(105)(zzp)]. Service tax for the GTA service provided is payable only on 25% of the amount charged for providing the GTA service and the balance amount is exempt from levy of service tax. In view of this provision, GTAs are not entitled to take input credit under Cenvat Credit Scheme on goods and services used for GTA service. Moreover service tax for GTA services provided in seven specified cases is not required to be paid by the GTA service provider but by the person making payment towards the freight.

In this year’s budget, services provided in relation to supply of tangible goods for use, without transfer of possession and effective control, has been made as separate taxable service and this service has come into force w.e.f. 16.05.2008. Consequently, supply of goods carriage to the GTA, without transfer of possession and effective control, for using the said goods carriage for transport of goods by road becomes leviable to service tax.

Notification No.29/2008-Service Tax, dated 26.06.2008 exempts fully the levy of service tax on supply of goods carriage to GTA for use in transportation of goods by road.