The Hindu Business Line : Clarity on goods transport

I am registered as a dealer with Central Excise for dealing with excise-duty-paid goods and for issue of Cenvatable invoices. When I receive these goods, I pay service tax for their transport by the goods transport agency (GTA).

So far, I have been making payment of service tax only on 25 per cent of the gross amount paid to the transport agency. I have been told that this facility is available only when the service tax is paid by the GTA itself and not by either the consignee or the consignor.

The service tax authorities are demanding service tax on the balance 75 per cent of the gross amounts paid by me to the transporter. The levy of service tax on GTA and the extent of availability of abatement, all appear to be confusing. Kindly clarify.

Arvind Santhanam

As per Service Tax Notification 32/2004 of December 3, 2004, service tax can be paid on 25 per cent of the gross amount payable/paid by the customer to the GTA. However, this concession is subject to two conditions, namely, i) no credit of duty paid on the inputs or capital goods used for providing such taxable service was taken by the service provider, and ii) the benefit of Service Tax Notification 12/2003 relating to exclusion of the value of the materials and goods sold while providing the service is not utilised.

Now, this notification is replaced by a fresh Notification 1/2006 of March 1, 2006, but the same conditions have been retained.

Service Tax Notification 35/2004 stipulates that in certain cases either the consignee or the consignor has to pay the service tax and not the GTA.

A dealer of excisable goods registered with excise authorities is one among them, and therefore, the liability to pay service tax in your case is on you or on the consignor.

In terms of certain instructions issued on March 30, 2005, the Government of India stipulated that the 75 per cent abatement will not be available when the tax is paid by a consignor or a consignee. However, on April 11, 2006, the Government withdrew this circular.

This means the demand for further payment of tax on the balance 75 per cent must be withdrawn.

However, you will still require a declaration or confirmation from the GTA that no credit of duty and no benefit under Notification 12/2003 have been taken.

(Send in your queries on service tax, excise and Customs to MentorAtYourService@gmail.com.

Blog at: http://MentorQA.blogspot.com

S. Murugappan

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