GOODS TRANSPORT AGENCY-SERVICE TAX IMPLICATIONS BY R.K RENGARAJ

R.K Rengaraj M.Com.,MBA., LL.B

Introduction:

Goods Transport Agency (GTA)- Meaning
As per section 65(50B), ‘goods transport agency’ means any commercial concern which provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

Thus, essential requirement are –

(i)  Service must be in relation to transport of goods by road and

 (ii) Service should be provided by ‘commercial concern’ and (iii) The service provider must have issued consignment note by whatever name called. 

If driver of goods carriage is self employed or he himself is owner of vehicle, he is not a 'commercial concern' and hence would not come under that definition, even if he issues a ‘consignment note’.

Consignment note –Meaning

As per explanation to rule 4B of Service Tax Rules, for purpose of rules 4A and 4B, “consignment note” means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage. It should be serially numbered, and should contain following details –

1. Name of the consignor and consignee

2. Registration number of the goods carriage in which the goods are transported

3. Details of the goods transported

4. Details of the place of origin and destination

5. Person liable for paying service tax whether consignor, consignee or the goods transport agency.

2013 (9) TMI 322 - CESTAT BANGALORE

M/s PARRY SUGARS INDUSTRIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX VISAKHAPATNAM

The case of the appellant is that the individual transporters who did not issue any consignment note for transportation of the goods cannot be called "Goods Transport Agencies" and therefore the appellant should not be held liable to pay any amount of service tax under the head "GTA service" under Section 65(105) (zzp) of the Finance Act 1994 read with Section 65 (50b) of the Act.

Goods Carriage-Meaning

As per section 65(50A) of the Finance Act, ‘Goods carriage’ has the meaning assigned to it section 2(14) of the Motor Vehicles Act, 1988. As per section 2(14) of the Motor Vehicles Act, 1988, goods carriage means any motor vehicle constructed or adapted for use solely for the carriage of goods or any motor vehicle not so constructed or adapted when used for carriage of goods.

As per section 2(28) of Motor Vehicles Act, 1988, Motor vehicle or vehicle means any mechanically propelled vehi­cle adopted for use upon roads whether the power of propulsion is transmitted thereto from external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or vehi­cle of a special type adapted for use only in a factory or any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding 25 (Twenty-five) cubic centimeters.

Rickshaw, taxi or tempo can come under definition of ‘goods carriage’, if they carry goods. However, if such rickshaw, tempo or taxi is owner driven or run by self employed person, it is not a ‘commercial concern’. It will be out of definition of ‘Goods Transport Agency’

Whether services of Government or non-profit organizations would come under service tax net?

Service of goods transport provided by Government, charitable institution or any other non-profit organisation will not be taxable, as it is not a ‘commercial concern’.

A GTA can avail either of the 2 benefits given to him i.e. (a) He can enjoy abatement of 75% on value of service & pay tax on only 25% of the value of service (b) he can claim the benefit of Cenvat Credit on duties paid on inputs & capital goods. In both the cases mentioned above, he is not barred from taking credit for service tax paid by him on value of input services availed by him for the purpose of rendering the taxable service.

Abatement:

Notn No.26/2012 dt 20.06.2012- 75% abatement

Sl No. 7. Services of goods transport agency in relation to transportation of goods.

25

CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

Exemption:

a.      To Exporters: Notn No.31/2012 dt 20.06.12

Service provided to an exporter for transport of the said goods by goods transport agency in a goods carriage  from any container freight station or inland container depot to the port or airport, as the case may be, from where the goods are exported; or Service provided to an exporter in relation to transport of the said goods by goods transport agency in a goods carriage  directly from their place of removal, to an inland container depot, a container freight station, a port or airport, as the case may be, from where the goods are exported.

            b. To Others: Notn No.25/2012 dt 20.06.12

 21. Services provided by a goods transport agency by way of transportation of -

(a)   fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;

(b)   goods where gross amount charged on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or

(c)   goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty;

And also see Notn No. 3/2013 dt 01.03.2013 amended to include foodstuff, fertilizers etc.,

21. Services provided by a goods transport agency, by way of transport in a

goods carriage of,-

(a) agricultural produce;

(b) goods, where gross amount charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

(c) goods, where gross amount charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred fifty;

(d) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages;

(e) chemical fertilizer and oilcakes;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or

(h) defence or military equipments;”;

REVERSE CHARGE MECHANISM: 30/2012 dt 20.06.2012

Sl.No.	Description of a service	Percentage of  service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
2	in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road	Nil	100%

Person liable for paying service tax : Notn No.36/2012 dt 20.06.12

(B) in relation to service provided or agreed to be provided   by a goods transport agency in respect of  transportation  of goods by road, where  the person liable to pay freight is,—

  (I) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

         (II) any society registered under the Societies Registration Act, 1860 (21 of

        1860) or under any other law for the time being in force in any part of India;

       (III) any co-operative society established by or under any law;

       (IV) any dealer of excisable goods, who is registered under the Central Excise

Act, 1944 (1 of 1944) or the rules made thereunder;

       (V) any body corporate established, by or under any law; or 

       (VI)  any partnership firm whether registered or not under any law including association of persons; any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage:

        Provided that when such person is located in a non-taxable territory, the provider of such        service shall be liable to pay service tax.

 “Provided that the place of provision of services of transportation of goods by goods transportation agency shall be the location of the person liable to pay tax.”

Sub-rule 2(1)(d) of Service Tax Rules, 1994 provides that where a service of transportation of goods is provided by a ‘goods transportation agency’, and the consignor or consignee is covered under any of the specified categories prescribed therein , the person liable to tax is the person who pays, or is liable to pay freight (either himself or through his agent) for the transportation of goods by road in a goods carriage. If such person is located in non-taxable territory, then the person liable to pay tax shall be the service provider.

 M/s AMRITA MOULDINGS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD(2013 (9) TMI 33 - CESTAT NEW DELHI).

Demand of service tax on GTA service - both consignor as well as consignee are body corporate - Held that - Consignor who would be liable to pay service tax and the same cannot be demanded from the appellant - person liable to pay service tax on the GTA service received would be the one who is liable to pay the freight either himself through his agent 

The author can be reached at: renga42002@yahoo.co.in

 Get Sudycafe's Updates by SMS in your mobile by Following below two Steps: 

1. Download our SmartPhone Application & 

2. Send a SMS, Type: JOIN CASTUDYCAFE & send to 9219592195

Subscribe to Studycafe by Email

Read more »

REIMBURSEMENT OF EXPENSES INCLUDE TAXABLE TURNOVER OF C&F SERVICES ?

REIMBURSEMENT OF EXPENSES INCLUDE TAXABLE TURNOVER OF C&F SERVICES ?

Introduction:

The levy of Service tax applies to services rendered by clearing and forwarding agents, who undertake, among other things, services of receipt, warehousing, despatch, record maintenance and accounts of goods on behalf of the Principal who appoints or engages such agents.  For the services rendered, the C&F agent receives commission or remuneration, by calculating minimum commission on a flat rate or turnover basis or a variable commission based on the performance, as  agreed upon between the agent and the principal. In addition to commission, it is customary that the Agent will seek reimbursement of regular expenses such as transportation charges, loading and unloading charges, rent, salary to the staff, electricity, telephone charges, stationery charges, courier charges, etc on actual basis. Ever since the introduction of service tax on C&F Agents (with effect from 16.07.1997 vide Notification No.26/97-ST dt.11.07.1997 and later as service provider from 01.09.1999), this service has seen lot of amendments and case laws with regard to valuation, applicability and cenvat credit. Plethora  of decisions have come both in favour of revenue and in favour of Assessee in the matter of reimbursement of expenses for the purpose of valuation. Very recently, the Hon’ble Madras High Court dismissed the Department’s CMA filed under Section 35G of Central Excise Act, 1944 against the Final order passed in No.902/07 dated 24.07.2007 by the CESTAT in the case of The Commissioner of Service Tax Vs M/s.Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT in the matter of reimbursement of expenses.

Facts and Background of the case:

The respondent is a C&F Agent based at Chennai.  Apart from regular remuneration (commission) they have got reimbursement from their principals towards freight, labour, electricity, telephone etc. The lower authorities have confirmed and demanded service tax of Rs. 4,01,767/-  on such amounts collected by them from two of their customers viz. M/s. Nestle India Ltd., M/s. Exceltia Foods Ltd. during September'99 to December'03. This demand has been challenged on merits as well as on limitation.   The SCN alleged that, under Section 67 of the Finance Act, 1994 read with Rule 6(8) of the Service Tax Rules, 1994, these charges also required to be added to the taxable value of the service rendered by the appellants as clearing and forwarding agents of their principals. The original authority and the first appellate authority held to the same effect. The appellate authority relied on the Tribunal's decision in Mett Macdonald Ltd. v. CCE , wherein certain expenses incurred by the assessee and reimbursed to them by their principal towards transportation, communication, stationery etc. were held to be part of the taxable value of Consulting Engineer's service rendered by the assessee.

Thereafter, the respondent preferred an appeal before the CESTAT, and the Tribunal referred to the decision rendered by the Tribunal in the case of Sri Sastha Agencies Pvt Ltd., Vs. Asst. Commissioner reported in 2007 (6) STR 185 (Tri.Bang), holding that no element other than remuneration received by a Clearing & Forwarding agent from their principal was to be included in the taxable value of the service. Thus, the Tribunal allowed the appeal 2007 (7) TMI 33 - CESTAT, CHENNAI. The Department filed the appeal by way of CMA before the Hon’ble Madras High Court. The Department submitted that as per the provisions of Rule 6(8) of Service Tax Rules, 1994, the value of taxable service in relation to the services provided by the Clearing and Forwarding Agent to the client for rendering services of Clearing and Forwarding operations, in any manner, shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client, engaging such agent. The department further submitted that considering the charges collected towards forwarding services, the same would form part of remuneration / commission and argued that in the case of Mett Macdonald (supra), what was considered by the Tribunal was Consulting Engineer's service, for which there was no specific rule defining taxable value/gross amount. 

Legal Provisions:

Section 65 (25) of the Finance Act:

 ‘Clearing and Forwarding Agent’ means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent.’

Rule 6(8) of Service Tax Rules, 1994, the value of taxable service in relation to the services provided by the Clearing and Forwarding Agent to the client for rendering services of Clearing and Forwarding operations, in any manner, shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client, engaging such agent.

Findings of The High Court:-.

In the absence of any material to show the understanding between the Principal and the Client that the Commission payable by the principal was all inclusive, it is difficult to hold that the gross amount of remuneration/commission would nevertheless include expenditure incurred by the assessee providing the services; that all incidental charges for running of the business would also form part of the remuneration or Commission (by whatever name called).  The phrase "by whatever name called" must necessarily have some link or reference or nature to the receipt of remuneration or commission.  Thus, if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission.

           As per Rule 6(8) of Service Tax Rules, 1994, the gross amount referred to therein would apply to receipts of such sum, which would bear the character of remuneration or commission, in that, the said sum is brought under the head "receipts". 

               As far as the present case is concerned, when the Revenue's case does not rest on a contention that the expenditure incurred has the character to fall under the expression "remuneration or commission", there is no hesitation in rejecting the Revenue's contention. Accordingly, the Civil Miscellaneous Appeal is dismissed.

Conclusion:

Divergent views have been taken on this issue by the fact finding authorities and the question arises now whether reimbursement of recurring expenses can form part of the taxable turnover.  The views taken by the Hon’ble High Court in Sangamitra case is for the material period September'99 to December'03 as later on the Rule 6(8) of Service Tax Rules, 1994 was  omitted Vide Notification No.10/2006-ST dated 19.04.2006.

The C&F agent is supposed to claim actual expenses without any add-on thereon and he should also provide supporting documents to the principal to avoid an inference that may be drawn that he has not acted as an agent and such expenses are incurred by him on his own. If Proper documentary evidence and records are maintained for expenses incurred on behalf of the Principal, then the taxable turnover valuation will be restricted to only commission or remuneration.  It is to be noted here that expenses like Telephone, Courier, Freight etc are already under Service tax net and adding again in the C&F Commission turnover will lead to double taxation.

The author can be reached at renga42002@yahoo.co.in

R.K RENGARAJ M.Com., MBA., LL.B

Get Sudycafe's Updates by SMS in your mobile by Following below two Steps: 

1.Download our Android Software & 

2. Send a SMS, Type: JOIN CASTUDYCAFE & send to 9219592195

Subscribe to Studycafe by Email

Read more »