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Friday, Jul 29, 2005

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Service tax abatement on GTA services clarified

K. R. Srivats

The benefit of abatement would be available only if Cenvat credit has not been availed of by the GTA on inputs for providing such services.

New Delhi , July 28

THE Finance Ministry has clarified on the scope of the 75 per cent abatement for computation of service tax on Goods Transport Agency (GTA) services.

The revenue department has made it clear that the benefit of abatement would be available to consignor or consignee (person other than the service provider) in cases where the liability of payment of service tax on GTA services falls on either of them.

"We have now clarified that a declaration by the GTA in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken by them, may suffice for the purpose of availing abatement by the person liable to pay service tax," Mr R. Sekar, Joint Secretary, Finance Ministry, told Business Line.

The service tax regime currently requires a consignor or a consignee, who is one of the seven specified persons including a factory, company, society, cooperative society, dealer of excisable goods and partnership firm, to pay the service tax on GTA services.

It also stipulated that the benefit of abatement would be available only if cenvat credit has not been availed by the GTA on inputs or capital goods used for providing such services.

The 75 per cent abatement was being allowed towards fuel, spare parts, toll taxes and local taxes incurred by the transport sector.

The service tax administrators were not willing to allow the consignor or consignee to take abatement as there was no mechanism by which the department could get an assurance that the GTA had not availed cenvat credit on inputs or capital goods used for providing services.

The Director General (Service Tax) had, on March 30, issued a letter to clarify that the benefit of abatement would not be available in those cases where persons other than the service provider were liable to pay service tax on goods transport agency services.

It was held through the DGST letter that abatement of 75 per cent from the gross amount charged by GTA for providing service of transport of goods by road would be available only in cases where the GTA was liable to pay service tax.

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