Credit on GTA – Board clarification
The Ahmedabad Chief Commissioner has a doubt
whether a person who is not a service provider, but discharges the service tax liability on the taxable services, under Section 68(2) of Finance Act, 1994, is entitled to avail credit of such service tax paid even if he is not using such service as input service for use in the manufacture of excisable goods or taxable services. The issue is raised in the context of service tax paid on goods transport agency service by a person other than the service provider.
The Board clarifies in a letter addressed to the Chief Commissioner and copies marked to all Chief Commissioners, Commissioners and DGs.
In the present case, the person liable to pay service tax under Section 68(2) is neither the provider of an output service nor the manufacturer of final product and therefore the input service can not be used either for providing output service or manufacture of a final excisable product. The person is treated as deemed provider of service in relation to services for which he is taxable only for the limited purpose of discharging the service tax liability and not for all purposes.
CENVAT Credit Rules are applicable only to the manufacturer of excisable goods or the provider of taxable services. It is evidently clear from the provisions of Section 68(2) that the person discharging the service tax liability is neither the provider of output service nor the manufacturer of final product as required under the CENVAT Credit Rules, 2004. The terms “final product” and “output service” are defined under CENVAT Credit Rules, 2004. The view that such recipient of taxable services even if they discharge their service tax liability under Section 68(2) are not entitled to avail credit of the service tax paid on taxable services received by them under CENVAT Credit Rules, 2004, is in accordance with the statutory provisions and there is no scope for any other interpretation.
Simple! You understand this? Translated into English, this simply means that if you are paying for goods transport and if you are neither a manufacturer, nor a service provider, you are not eligible for credit on the Service Tax paid on goods transport. Isn’t this obvious? Not really. But it seems the field has already taken a view that manufacturers are not eligible for credit of Service Tax on goods transport. Before the rampage starts, it would be nice if the Board can give another clarification.
While on this, it has to be noted that there are many issues which call for immediate clarification from the Board regarding GTA.
1. Should Service Tax on GTA be paid only by Challan?
2. Can a manufacturer pay the tax from his Cenvat account or PLA?
3. The Challan evidencing payment of duty is the document prescribed for taking credit. What is this Challan? Is it TR6 Challan or an invoice?
4. If payment can be made from cenvat account, what is the government getting? A few pages of accounts and no money?
5. If it has to be paid only by TR6 challan, this amount can be taken as credit and that credit can be used for paying excise duty. Even then the government does not get any money.
6. If payment is allowed from PLA why not from credit account?
7. Does it mean that really for a manufacturer, there is no Service Tax on GTA as he gets it back as credit?
8. Is the Government clear on this tax?
9. And finally why this confusion; why can’t the system be more simple and clear?
Will the Board clarify these issues? And publicly! It beats logic that the Board should give important clarifications by letters to field officers. This letter will not be made available to the public. After 10 years somebody will refer to this letter and then nobody including the Board will have a copy of this.
You can access the Board’s letter here