Reverse Charge : Goods Transport Agency Service changes wef 01.07.2012

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As you know, Central Government vide Notification No. 36/2012-ST dated 20th June, 2012 has amended Rule 2(1)(d) of Service Tax Rules, 1994. The changes, applicable from 01.07.2012, inter alia include amendment in respect of Goods Transport Operator Agency Service. Team Do You Know Services has made an attempt to summarise these changes in tabular form produced below:-


S. No.Amendment with their implications
1.Change in the person specified as “person liable to pay service tax”, in the rule:

EarlierReverse charge was applicable,where the consignor or consignee of goods falls under specified category.Earlier if the consignor or consignee falls under the specified category and the freight is paid by individual then it is the individual who is required to pay service tax under reverse charge.

This hardship is now removed as reverse charge is applicable only when the person liable to pay freight falls under specified category.

(please see illustration 1 also)
w.e.f. 1/07/2012Reverse charge is applicable,where the person who is liable to pay freight falls under specified category.
2.Change in the “specified category”, as given in the said sub-rule:

EarlierAny partnership firm registered, by or under any lawW.e.f. 01.07.2012 provision of reverse charge is applicable even if person liable to pay freight is unregistered partnership firm.

w.e.f. 1/07/2012Any partnership firm whether registered or not under any law including association of persons.
3.Inclusion of a new proviso to the said rule:

W.e.f. 1/07/2012Provided that when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax.The implications are explained with the help of an example as given in illustration 2.


Illustration 1: In relation to transport of goods by road the consignor and consignee are Mr. A (individual) and M/s. ABC Ltd (body corporate registered under Companies Act, 1956), respectively. As per mutual understanding of the parties Mr. A,the consignor is liable to pay freight to the goods transport agency.

Earlier: Since, the consignee M/s ABC Ltd. falls under specified category as mentioned in the rule, the person paying freight to GTA was liable to pay service tax under reverse charge under Section 68(2) of Finance Act, 1994. Accordingly an individual was required to take service tax registration andall the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.

W.e.f. 1/07/2012: Since the person paying freight i.e. Mr. A (individual), is not a person who falls under specified category as mentioned in the rule, hence reverse charge provision is not applicable for such individual and service tax for the same shall be paid by the service provider under Section 68(1) of Finance Act, 1994i.e. GTA shall pay the service tax in such case.

Illustration 2: A goods transportation agency ABC located in Delhi transports a consignment of new motorcycles from the factory of XYZ in Gurgaon (Haryana), to the premises of a dealerin Jammu (non-taxable territory). Say, as per mutually agreed terms between ABC and XYZ, the dealer in Jammu is the person liable to pay freight. Here, in terms of amendedprovisions of rule 2(1)(d), since the person liable to pay freight is located in non-taxableterritory, the person liable to pay tax will be ABC. Accordingly, the place of provision ofthe service of transportation of goods will be the location of ABC i.e. Delhi.


Atul Kumar Gupta
B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Former Chairman NIRC of ICAI
Former Chairman NIRC of ICWAI
Author of “An Introduction to Service Tax”
Author of “Comprehensive Guide to Service Tax”
Mobile: 9810103611Email: atul@servicetax.net

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