Liability of service tax to trading in coal - reg

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2014 Resp Sir,
WE ARE NOT REGISTERED UNDER SERVICE TAX ACT TILL NOW .We are having coal trading partner ship business we pay freight to each lorry who brings coal different mines and different ports from different transport agents after that we dump the coal to our yard and resale that product . sir my question is do our firm is liable to pay service tax for freight in put and freight out put,IF WE COMES UNDER LIABILITY OF PAYING SERVICE TAX , IS THERE ANY LEVEL(SLAB) WHICH IF WE CROSS THEN WILL COME UNDER THE SERVICE TAX ACT LIKE THAT . AND ONLY WE ARE JUST TRADING COAL AND SELLING TO END THOUGH WE HAVE TO PAY SERVICE TAX

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2014 sir please reply if you can to my question

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2024 **Service Tax Liability on Coal Trading:**

Based on the details provided and considering the Indian Service Tax regime, here is a breakdown of your potential service tax liability regarding the trading of coal:

### 1. **Service Tax Liability for Freight:**

**a. **Freight Inward (Input Freight):**

- **Service Tax on Freight Inward:** Service tax is generally not levied on freight charges for transporting goods (like coal) to your premises if you are only a trader. Service tax on freight is typically applicable to services like transport of goods by road, rail, or air when provided by a transporter.
- **Input Tax Credit (ITC):** If your firm is registered under service tax, you could claim input tax credit on service tax paid for freight services used in relation to your business. However, if your firm is not registered, you cannot claim ITC.

**b. **Freight Outward (Output Freight):**

- **Service Tax on Freight Outward:** As a trader, if you charge freight separately on the sale invoice to customers, you are not liable to pay service tax on such freight charges under the service tax regime. Instead, your responsibility is to ensure that your invoice accurately reflects the transaction and does not include service tax if not applicable.

### 2. **Registration Requirement and Liability:**

**a. **Service Tax Registration:**

- **Threshold Limit:** Under the service tax regime, there was a threshold limit for service providers, below which registration was not mandatory. For many service providers, the threshold was Rs. 10 lakhs. However, this has been replaced by GST from 1st July 2017.
- **For Trading Activities:** Typically, trading activities, including coal trading, were not subject to service tax. Instead, such activities would be subject to VAT or GST, depending on the tax regime in place at the time.

### 3. **Current Tax Regime - GST Impact:**

- **GST Introduction:** From 1st July 2017, the Goods and Services Tax (GST) regime replaced service tax, VAT, and other indirect taxes. Under GST, the treatment of freight and trading activities is different.
- **GST on Freight:** Under GST, freight charges (both inward and outward) are subject to GST. You need to register under GST if your turnover exceeds the prescribed threshold limit, which is Rs. 40 lakhs for most states or Rs. 20 lakhs for special category states (except for Jammu & Kashmir).

### **Action Points for You:**

1. **Check GST Registration Requirements:**
- Verify whether you need to register under GST based on your turnover. If your turnover exceeds the threshold limit, registration is mandatory.

2. **Understand GST Compliance:**
- **Freight Charges:** Under GST, ensure you charge GST on freight if applicable and maintain proper documentation.
- **Input Tax Credit (ITC):** If registered under GST, you can claim ITC on GST paid on input services like freight, provided it is related to your business operations.

3. **Consult a Tax Professional:**
- Given the transition from service tax to GST and the specifics of your business, it is advisable to consult with a tax professional or GST consultant to ensure compliance with current regulations.

### **Summary:**

- **Under Service Tax (Pre-GST):** As a coal trader, you were generally not liable for service tax on freight charges.
- **Under GST (Post-1st July 2017):** You may be liable for GST on freight charges and must ensure registration and compliance based on your turnover.

If your business falls under the GST regime, register as required and comply with the GST regulations for both input and output taxes.

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