RECENT CONCESSIONS TO GOOD TRANSPORT SERVICES

[Dr. Sanjiv Agarwal]

Goods Transport Agency (GTA) service has always been the most sensitive service for the Central Government. From the concessions point of view, one can say that GTA service providers, considered as 'movers and shakers' of the economy, and rightly so, are the blue eyed boys of the Finance Ministry. GTA services facilitate   the trade and industry through its wheels.

GTA services since its introduction in new avtar  (erstwhile goods transport operator services) has been borough into service tax net by Finance Act 1994, w.e.f. 1.1.2005. Earlier, goods transport service were taxed as goods transport operators  w.e.f. 16.11.97 but service tax was withdrawn w.e.f 2.6.1998 vide Notification No 49/1998-ST.

In the new service as goods transport agency service, an abatement of 75 percent of taxable value is allowed vide Notification No 13/2008-ST dated 1.3.2008. Transportation of eggs, milk, vegetable and fruits is also exempt from levy of service tax vide Notification No 33/2004-ST dated 3.12.2004. Individual consignment notes of value upto Rs 750 each are also exempt vide 34/2004-ST dated 3.12.2004 subject to certain conditions.

Benefit to Exporters

GTA services as specified in Notification No 40/2007-ST dated 17.8.2007 (superseded by Notification No 41/2007 ST dated 6.10.2007) and Notification No 3/2008- ST dated 19.2.2008 have been exempted (refund allowed) in case of exporters under Notification No 41/2007-ST dated 6.10.2007 as amended by Notification No 3/2008-ST dated 19.2.2008. Accordingly, following GTA services received by an exporter and used for export of goods shall be exempt from levy of service tax subject to certain conditions and claim of refund as per prescribed procedure.

(i)    Services provided for transport of said goods from the inland container depot to the port of export

(ii)    Service provided to an exporter in relation to transport of goods directly from the place of removal, to inland container depot or port or airport, as the case may be, from where the goods are exported.

For claiming above exemptions, exporter will have to comply with the following conditions -

(i)    export goods are transported directly from the place of removal to inland container depot or port or airport, as the case may be, from where the goods are exported,

(ii)    invoice issued by the exporter in relation to export goods shall indicate the name of the inland container depot or port or airport from where the goods are exported,

(iii)   details of exporter's invoice relating to export goods are specifically mentioned in the lorry receipt and the corresponding shipping bill,

(iv)   exporter shall declare in the refund claim indicating whether such service has been received from the said service provider for purposes other than for export.

Ancillary Services Provided by GTAs

Since services provided by GTAs at times are not merely transportation of goods by road in a goods carriage but it also involves certain allied services which may be otherwise necessary to render along with GTA service such as  loading, unloading, packing, unpacking transshipment, temporary warehousing, transportation of time sensitive documents etc. CBEC's Circular No 104/07/2008-ST dated 6.8.2008 has clarified on these issues so as to avoid confusion leading to valuation disputes between revenue and GTA's .

Transportation & Allied Services

 GTA's also  provide  goods transportation services as a composite service. These services are provided alongwith main service which is transportation of goods by road. If cargo handling is done as a main service which involves a nominal transportation, then such case won't be covered under Circular No 104.  The revenue's intention is to provide the flexibility of classification of service into GTA services thereby, allowing it the benefits of abatements. The principal service should be transportation  of goods by road and ancillary or intermediary services which may be rendered with GTA service should constitute part such composite service. The ancillary services should not be independent services in themselves.

These ancillary or allied or intermediary services may involve one or more of following services which are only illustrative -

-                      Loading of goods in carriage

-                      Unloading of goods from carriage

-                      Packing of goods

-                      Unpacking of goods

-                      Transshipment of goods (local carriage inward / outward)

-                      Temporary warehousing

-                      Transit security

-                      Watch and ward of goods while in GTA's custody

-                      Other ancillary services

CBEC has clarified that if any ancillary/intermediate services is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it.  This is based on the principles of classification of service The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification.  As clarified earlier vide F.No. 334/4/2006-TRU dated 28.2.2006 (para 3.2 and 3.3) and F. No. 334.1/2008-TRU dated 29.2.2008 (para 3.2 and 3.3),  a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified.   While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in section 65 A.

Thus, such ancillary or intermediary services, if provided alongwith transportation of goods will not be dealt with separately but treated as GTA service only if following conditions are satisfied-

-                      Ancillary services are part of single composite service

-                      Composite principal service is a GTA service

-                      Ancillary services are provided in relation to principal service of road transportation of goods and in the course of such transportation

-                      Ancillary services  are not provided as independent activities or services but are means for successful rendering of GTA service

-                      Value of such services is included in the invoice / consignment note.

Transportation and Packing 

In some cases, GTA provides transportation of goods where packing of goods is involved  or is also undertaken as an integral part of the transportation service. If packing is undertaken alongwith transportation, then as per section 65 (23) of Finance Act 1994, (as amended by Finance Act 2008), cargo handling service gets attracted. In such cases of cargo handling, what is important is that transportation is not the essential character of cargo handling service but is just incidental to rendering of cargo handling service. CBEC has clarified that where GTA undertakes transportation of goods involving packing of goods and issues a consignment note indicating charges including packing, then the entire service shall be treated as GTA service only and cargo handling service can not be taken into account. As a result  , if a service  provider engaged in cargo handling  services provides such service, it will be cargo handling service but if it is provided by a GTA issuing consignment including packing, it will be treated as GTA service and as such can avail benefit of abatement .

Transportation of Time Sensitive Documents

Again, goods could included articles, goods, documents etc, which are time sensitive . If the test of 'time sensitivity" is proved, then the service may be classifiable under courier service [section 65(105) (f)] .In this respect also, CBEC has clarified text if the entire transportation is by road, undertaken by a GTA and a consignment note is issued by a GTA, it could be treated as GTA service and not a courier service.

Supply of Goods

Supply of tangible goods/ renting of immovable property  [section 65 (105) (zzzzf)] is now a taxable service, as introduced by Finance Act 2008 . Tangible goods would also include goods carriage (motor vehicles). Notification No 29/2008-ST dated 26.6.2008 exempts the taxable services in relation to renting or supply of goods carriage by GTAs  to other persons. It is a common practice in goods transporters trade that supply of goods carriage is also done on contract basis against consideration in terms of hire charges, fuel charges plus charges etc. Thus, if the vehicle (carriage) itself is supplied, there will be no service tax charged either under GTA service or under supply of tangible goods service.

Service Consumed by GTA's

While certain ancillary and intermediary services rendered by GTAs will not be treated as such service but covered under GTA services only, if similar services are consumed by GTA's as input services while rending GTA service, no service tax shall be levied on such services. Recently, Central Government has exempted certain services (vide Notification No 1/2009-ST dated 5.1.2009) from levy of service tax rendered to a GTA . These eight services are as follows-

 

Clause of Section 65 (105)                               Taxable Service

           j                                               Clearing & forwarding service

            k                                              Manpower recruitment or supply service

            zr                                             Cargo handling service

            zza                                           Storage & warehousing service

            zzb                                           Business auxiliary service

            zzzf                                          Packaging  service

            zzzq                                          Support services for business or commerce

            zzzz                                          Renting of immovable property

Thus, in case of aforesaid services, rendered to any GTA, service provider shall not charge service tax w.e.f. 5.1.2009, thereby reducing the input costs for the GTA.

The discussion herein above only goes on to say that GTA's are certainty the privileged class in service tax .