Service tax on freight income

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 January 2016 Actually we are transporter and working only for companies. But in few case after supply of material to the party godowns , on returning our truck is hired by misc transporter on its GR.
He pay us a fixed amount for the trip for the truck.
Now we wish to know,
1. is there any service tax liability will arise on it on us and
2. In which head income to be shown.

Kindly advise.

Querist : Anonymous

Querist : Anonymous (Querist)

23 January 2016 Anyone is here..........................

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Your situation involves **freight income** received by your transport business **when your truck is hired out to another transporter**, and not directly used by you to serve your clients.

Let’s break this down:

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### ✅ 1. **Is there any Service Tax liability on such freight income?**

**Yes**, service tax liability may arise **if the activity is not covered under the exemption available to a Goods Transport Agency (GTA)**.

#### ➤ When are you *not liable* to pay Service Tax?

If **you are acting as a GTA**, and:

* Issue a **consignment note (GR)** for the freight service, and
* The service recipient is one of the **specified persons** (like a company, factory, partnership firm, etc.), and
* You qualify under the **GTA exemption notification (25/2012-ST)** and/or
* The **Reverse Charge Mechanism (RCM)** applies, and the recipient is liable to pay service tax (as per Notification No. 30/2012-ST)

Then **you are not liable**, and the service recipient (transporter or company) pays tax under RCM.

#### ➤ But in your case:

* You are **not issuing the GR** — it’s being issued by the **other transporter**.
* You are **only providing your truck** for a fixed consideration.

In such cases, **you are not acting as a GTA**. Instead, you are **leasing/renting the truck**, or providing **transport vehicle rental service without operator**.

This changes the tax treatment.

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### ✅ 2. **How to classify this income?**

It depends on how the service is structured:

#### 🔸 Case A: If you provide **vehicle along with driver** (operated service)

Then it is **"Renting of motor vehicle designed to carry goods"**, which is a **taxable service** under:

> **Service Code 9966 or 9964** under "Renting of Transport Vehicles with Operator"

* In that case, **service tax is applicable**, and may fall under **reverse charge mechanism (RCM)** depending on who the recipient is.

#### 🔸 Case B: If you provide **only the truck (without operator)**, it's treated as:

> **"Transfer of right to use goods"**, possibly subject to **VAT**, not service tax (as it's a deemed sale in some cases).

But if there is **no transfer of possession and control**, it could still be **taxable as a service**.

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### ✅ Summary Table

| Scenario | Service Tax Liability | Remarks |
| --------------------------------------- | ------------------------------- | --------------------------------------- |
| You act as GTA and issue GR | ❌ No (RCM applies to recipient) | Exempt or RCM covered |
| You give truck on hire (with driver) | ✅ Yes | Renting of goods vehicle with operator |
| You give truck on hire (without driver) | 🚫 Possibly VAT applicable | Deemed sale; service tax not applicable |

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### ✅ What should you do?

1. **Identify the nature of income**: Are you giving the vehicle on rent? Is it with or without a driver?
2. **Determine if a consignment note is issued**: If not, you are **not acting as GTA**.
3. **Service tax return (ST-3)**: Report the income under appropriate **taxable service category**:

* If "Renting of goods carriage with operator" → use that head.
* Don’t report it as GTA if no GR is issued.

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If you clarify whether you're giving **vehicle with or without driver**, I can guide you more precisely (including applicable abatement or RCM if any).

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