Shikha Singhania

Service Tax on Transportation of Goods

Introduction

Transportation of goods can be through ship/vessel, air, road or rail. Every category has few
exemptions from service tax; and some of them also appear in the negative list and abatement scheme.
Let us take a brief look at it.

The following services provided in relation to transportation of goods are specified in the negative list of
services:-

By road except the services of
a) a goods transportation agency; or
b) a courier agency
By aircraft or vessel from a place outside India up to the customs station of clearance in India;
By inland waterways


Transport of goods by vessel - Section 65(105)(zzzp)

Sea freight for goods from outside India to first customs station of clearance in India is not
taxable
Sea freight for goods from going outside the country is not taxable, since as per rule 10 of Place
of Provision of Service Rules, Place of Provision of Service is outside India.
Service Tax is only payable when goods are transported from one port to another in India.
Abatement Service tax is payable on 50% of value. No Cenvat credit should be availed as per
Notification No. 26/2012, Sl.No 10 (w.e.f 01/07/2012)
Exemption - Transportation of petroleum products, agriculture produce, foodstuff, fertilisers,
postal mail, relief material etc. by vessel within India is not taxable
Transport of goods by inland waterways (national waterways or other waterway on any inland
water Indian waterway authority of India act) is not taxable.


Transport of goods by air - Section 65(105)(zzn)

Air freight for transport of goods from outside India to first customs station of clearance in India
is not taxable.
Air freight for transport of goods sent outside from India is not taxable, as per rule 10 of Place of
Provision of Service Rules.
Air transport of goods within India is taxable.


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Transport of goods by rail - Section 65(105)(zzzp)

Presently, only transport of goods in containers is subject to tax
Abatement Service tax is payable on 30% of value on all goods transported by rail w.e.f. 1-
10-2012.
Transportation of petroleum products, agriculture produce, foodstuff, fertilisers, postal mail,
relief material etc. by vessel is not taxable.

Example of transportation of goods which comes under negative list _____________________
A truck owner transporting goods directly without involvement of Goods of a
Goods transport agency.
A manufacturer transporting goods to dealer through own transportation.
Transportation on bullock cart, tonga, rickshaw, thela etc does not attract tax.
Farmers transporting goods of fellow farmers after harvest from farms to sugar mills


Transport of goods by road Goods Transport Agency (GTA) service -
Section 65(105)(zzp)

Service by way of transportation of goods by road, except services of Goods Transport Agency, (GTA)
and Courier Agency is within the ambit of the negative list
Goods transport agency" means any person who provides service in relation to transport of
goods by road and issues consignment note, by whatever name it is called. Sec 65B(26) of
finance Act, 1994.
Courier agency means any person engaged in the door to door transportation of time sensitive
documents, goods or articles utilising the services of a person either directly or indirectly, to carry or
accompany such documents, goods or articles Sec 65B(20) of Finance Act, 1994.
Thus, a Goods transport Agency should meet the following tests
It should be any person
It should provide service in relation to transport of goods
Such transportation should be by road
The Agency should book the goods for transport
It must issue a consignment note (or such document called by any other name) against the goods
so booked and transported.

Exemptions___________________________________________________________________

Goods transport freight for single consignee up to Rs.750 and for single vehicle up to Rs.1500 is
exempt.

Transport by road of fruits, vegetables, eggs, milk, food grains or pulses is exempt (no exemption
to cotton, sugar cane, oil seeds, tobacco or other agricultural produce)

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Abatement___________________________________________________________________
Service tax has to be paid only on 25% of the gross amount paid to the Goods Transport Agency,
provided the service receiver has taken a certificate from GTA that he has not availed Cenvat credit on
inputs, capital goods and input services.
Note : For gross amount, octroi is not taken into account.

Place of Provision of a service of transportation of goods_______________________________
Place of provision of a service of transportation of goods is the place of destination of goods, except in
the case of services provided by a Goods Transportation Agency in respect of transportation of goods
by road, in which case the place of provision is the location of the person liable to pay tax (as
determined in terms of rule 2(1)(d) of Service Tax Rules, 1994 (since amended).


Reverse charge Mechanism

The tax is payable on reverse charge basis by consignor or consignee whoever pays the freight,
whereby the consignor or the consignee is a factory, registered society, co-operative society, registered
dealer under central excise, body corporate, partnership firm, LLP and association of persons.
Thus in a case where an individual, Huf or BOI is liable to pay tax as consigner or consignee, then the
GTA himself will be liable to pay service tax.
However while paying taxes under reverse charge mechanism; it has to be paid in cash only and no
Cenvat credit can be utilized for this purpose. Also, the general exemption of Rs. 10 lakhs available to
small service providers is not applicable in cases where service receiver is liable to pay service tax.
Consigner/consignee will be eligible to take Cenvat credit of GTA services if the service falls under the
definition of input service as defined in Rule 2(l) of CENVAT Credit Rules, 2004.

Other Important points relating to GTA

If the goods transport agency has charged service tax then no service tax is payable by
consignor or consignee.

If the freight is paid by consignor, he is liable to pay service tax. He can recover the freight
amount (including service tax) but it should not be shown separately in his invoice or debit note.
If shown, he may be held liable to pay service tax again.

Registration by GTA is not required if taxable turnover is below exemption limit.

Courier, express cargo and angadia services are subject to service tax.
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If the driver of the goods carriage is self employed either by taking vehicle on rent from others
or as owner of one or two vehicles and does not issue consignment note, then he would not be
liable to pay service tax.

In CCE v. Kanaka Durra Agro oil products P Ltd. 2009 it has been confirmed that there was
no liability on the recipients of the service, to pay service tax, in cases of transportation
undertaken by the individual truck operators/ lorry owners and not by GTA.

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