23 May 2012
With a view to reduce the impact of middle-men who were inflating the prices of yarn, a GOI Company has been buying yarn at mill gate price and forwarding/selling at the same price to various agencies (State PSUs, Export Promotion Council, Weavers' Cooperative Societies, approved Exporters/traders,etc) on freight "to pay" basis. The freight charges and godown/depot charges incurred by the agencies are reimbursed by the GOI Company at a specified percentage of "value" of yarn (not actual cost of freight) transported/handled by the agencies. (The transport contract was entered into between the agencies and transporters). The scheme intend to benefit the weavers through these agencies. The GOI Company gets back the entire reimbursement from GOI as grants.
Questions: Whether the activities of (transportation and storage of yarn) are in the nature of service for tax purpose?
Whether the GOI Company should deduct TDS from the reimbursement of freight charges incurred by the agencies?
Whether the GOI Company should deduct TDS from the reimbursement of depot charges incurred by the agencies?
If the payment of freight reimbursement and depot charges delayed for some reasons, the GOI Company compensate the agencies by way of interest on delayed payment. Whether any tax (TDS) attracted on this?