Service Tax - GTA - How to prove CENVAT Credit was not taken?
THE following is an extract from DDT 1893 - 04 07 2012
ONE of the most litigated services was the service of goods transport agency in relation to transport of goods. The tax was and is required to be paid in most cases by the service recipient. There is and was an abatement of 75%. But things are not that simple.
There was a condition that the abatement is subject to the condition that no CENVAT Credit was taken. There was a lot of litigation on who should not take the credit - the GTA or the service recipient who pays the tax? Finally, by Notification No. 13/2008, Government had granted an unconditional abatement for GTA.
Now under the negative regime, it is back with the condition that CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. (See Notification No. dated 20.06.2012)
Now, what are the inputs, capital goods and input services on which a transporter can take credit, especially when he pays no Service Tax at all? Trucks, Diesel, Tyres, phones?
But how does a recipient prove that the provider had not availed CENVAT credit? In the earlier regime, it was instructed that the recipient should take a declaration from the GTA that he has not availed CENVAT Credit. Maybe we should get back to that system again.
Whenever you pay Service Tax on goods transport, be sure to take a certificate from the truck operator that he has not availed CENVAT Credit - otherwise you will be asked to pay Service Tax on the total freight instead of on 25% of the value.
Is this intentional or a copy and paste mistake? If it is the latter, Board should not stand on false prestige and delete this unwanted condition which is bound to produce litigation in abundance. The past litigation on this issue should be an education guide to the Board.
Further to add a little confusion, as per Notification No. 30/2012- S.T dated 20.06.2012, (Sl. No.2 of the Table), Percentage of Service Tax payable by the person receiving the service, in case of services by a GTA in respect of transportation of goods by road, is 100% . Already a few Departmental officers asked DDT whether abatement was not available and 100% tax had to be paid by the recipient. This is exactly the confusion that the DGST created in 2005 by issuing a circular that 25% tax is only applicable if the GTA pays the tax and not when the consignee or consignor pays it. That issue snowballed into a major crisis with hundreds of Show Cause Notices and Audit objections flying around and consultants made tons of money! (Please see - 13 03 2007)
Now, we are informed that litigation has started exactly as we predicted. An Audit Objection was raised in a Commissionerate - "Short payment of service tax under noti.26/2012-ST". Audit says that in the absence of proof of non-availment of credit, the recipient has to pay 100 percent tax and not 25 percent and in any case, by virtue of Notification No. 30/2012, the recipient is required to pay 100 percent.
Board should step in before this spreads like a wild fire across the country and consultants are showered with hundreds of cases. Maybe they should issue another notification identical to 13/2008-ST.