Determination of st liability

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This query is : Resolved

ganeshkumar (Querist)

31 July 2012 A Government Company “E” buys yarn from a private Company “R”. The Company “R” (consignor) prepares invoices which indicate Company “E” as consignee. According to the invoices of Company “R”, the Goods Transport Agency (“G”) should deliver yarn at the place of a registered co-operative society “CS” on freight “to-pay” basis. The Lorry Receipts (LR) issued by the GTA mentions Company “R” as the Consignor and Company “E” as Consignee, and delivery point would be at the place of “CS” without any indication about the service tax component as well as the person responsible for payment of service tax on the transportation charges. The Co-operative society “CS” makes the freight payment to the GTA and then gets it reimbursed from the Government Company "E”. Meanwhile, while the goods-in-transit, the Company ‘E” raise invoices on “CS” without any indication about the shifting the responsibility on “CS” for payment of service tax payable on the freight. The Company “E” makes the freight reimbursement to “CS” under a GOI scheme wherein a specified percentage on the total value of the yarn is paid as freight limited to actual freight cost incurred by “CS” so as to benefit the weavers who are the ultimate beneficiaries under the GOI Scheme.
My views:
As per rule 2(1)(d)(v), person liable for paying service tax means any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage, where the consignor or consignee of goods is one of the specified persons mentioned therein.
* The GTA is not liable for paying service tax as the "R", "E", and "CS" are specified persons.
* The Consignor “R” also not responsible for paying service tax since the freight was not paid by or on behalf of “R”.
* The CS is also not responsible for paying service tax on freight because (a) the CS is not consignee as per Invoice issued by “R” and Lorry Receipt and (b)the absence of shifting the responsibility on “CS” through further invoice raised by "E" on “CS” for sale during goods-in-transit by “E”.
* The Company “E” paid freight through “CS” as the same was reimbursed to “CS” subsequently under a GOI Scheme for the ultimate beneficiaries (weavers.
* Under the Scheme, the reimbursement is not optional at the mercy of E but compulsory. The Scheme does not permit the direct payment to transporters by E but only through reimbursement of freight by E to CS.
* The only technical lacuna is that the LR being the consignment note does not specify the ST amount and the responsible person for payment of the same. However, this lacuna does not obviate the responsibility of payment of ST itself.
* Thus, the Company “E” is responsible for payment of ST.

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ganeshkumar

ganeshkumar (Querist)

18 September 2012 Any one to offer comment !!

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