Service tax on goods transport.
This query is : Resolved
19 May 2015
DEAR SIR/ MADAM,
1) WE ARE INTO TRADING & HAVE SERVICE TAX REGN. UNDER GTA CATEGORY. AS OF NOW WE PAY FOR SERVICE TAX (AFTER ABATEMENT OF 75%)@ 12.36% ON TRANSPORT CHARGES OF PURCHASED BY US.IS THIS CORRECT ?
2) IN FEW OF THE CASES WE PAY FOR FREIGHT CHARGES ON BEHALF OF OUR CUSTOMERS AND CHARGE SAME AMT. IN THEIR TAX INVOICE (AFTER SALES TAX) AS FREIGHT CHARGES PAID RS.xxxxx. THIS AMT. INCLUDES SERVICE TAX PAID BY US TO TRANSPORTER.
IS THIS A CORRECT WAY OF PRESENTATION ? OR WE HAVE TO BIFURCATE THESE CHARGES AS FREIGHT CHARGES Rs.XXXXX + SERVICE TAX Rs.XXX WHILE MAKING TAX INVOICE. i.e. VALUE OF COMMODITY + SALES TAX + FREIGHT CHARGES + SERVICE TAX.
BASICALLY WE ARE JUST PAYING FREIGHT CHARGES ON BEHALF OF PARTY. THESE PAYMENTS ARE ALL BY CHEQUE & THE FREIGHT WE PAY IS BOOKED IN OUR RECORDS UNDER EXPENSES.
PLEASE ADVICE WITH VEIW OF SERVICE TAX.
THANKS & REGARDS,
RACHANA
1) WE ARE INTO TRADING & HAVE SERVICE TAX REGN. UNDER GTA CATEGORY. AS OF NOW WE PAY FOR SERVICE TAX (AFTER ABATEMENT OF 75%)@ 12.36% ON TRANSPORT CHARGES OF PURCHASED BY US.IS THIS CORRECT ?
2) IN FEW OF THE CASES WE PAY FOR FREIGHT CHARGES ON BEHALF OF OUR CUSTOMERS AND CHARGE SAME AMT. IN THEIR TAX INVOICE (AFTER SALES TAX) AS FREIGHT CHARGES PAID RS.xxxxx. THIS AMT. INCLUDES SERVICE TAX PAID BY US TO TRANSPORTER.
IS THIS A CORRECT WAY OF PRESENTATION ? OR WE HAVE TO BIFURCATE THESE CHARGES AS FREIGHT CHARGES Rs.XXXXX + SERVICE TAX Rs.XXX WHILE MAKING TAX INVOICE. i.e. VALUE OF COMMODITY + SALES TAX + FREIGHT CHARGES + SERVICE TAX.
BASICALLY WE ARE JUST PAYING FREIGHT CHARGES ON BEHALF OF PARTY. THESE PAYMENTS ARE ALL BY CHEQUE & THE FREIGHT WE PAY IS BOOKED IN OUR RECORDS UNDER EXPENSES.
PLEASE ADVICE WITH VEIW OF SERVICE TAX.
THANKS & REGARDS,
RACHANA
20 May 2015
First of all rate have changed...abatement is now 70% only... so you paying on behalfof party.....?? In most cases
20 May 2015
DEAR SIR,
IN MOST OF CASES WE PAY FREIGHT ON BEHALF OF PARTY AND CHARGE IN THERE TAX INVOICE AFTER SALES TAX.
ALSO PLEASE ADVISE IF SERVICE TAX IS PAYABLE BY US ON CARRIAGE INWARD & CARRIAGE OUTWARD PAID BY US BUT WHERE WE ARE NOT GETTING ANY BILL / RECEIPT FROM TEMPOWALA FOR THESE CHARGES.THESE CHARGES ARE PAID FROM PETTY CASH.
THANKS & REGARDS,
RACHANA
IN MOST OF CASES WE PAY FREIGHT ON BEHALF OF PARTY AND CHARGE IN THERE TAX INVOICE AFTER SALES TAX.
ALSO PLEASE ADVISE IF SERVICE TAX IS PAYABLE BY US ON CARRIAGE INWARD & CARRIAGE OUTWARD PAID BY US BUT WHERE WE ARE NOT GETTING ANY BILL / RECEIPT FROM TEMPOWALA FOR THESE CHARGES.THESE CHARGES ARE PAID FROM PETTY CASH.
THANKS & REGARDS,
RACHANA
24 July 2025
Hi Rachana! Let me clarify your points one by one regarding **service tax on goods transport** and invoicing when you pay freight on behalf of customers:
---
### 1) Paying service tax on freight charges as a GTA-registered trader:
* **You mentioned paying service tax @ 12.36% after 75% abatement.**
— The current (as per recent amendments around 2015) abatement for GTA services is **70%**, so the taxable value is 30% of freight charged.
— Hence, the effective service tax rate is **12.36% on 30% of freight charges**.
* **So, if you are paying service tax on freight charges paid for purchase of goods (carriage inward):**
— If the transporter is registered and charging service tax, you don’t pay service tax under reverse charge.
— If transporter is not registered, you pay under reverse charge mechanism (RCM) on freight inward.
* **If you are registered as a GTA yourself, you charge service tax on freight charged by you to customers** after abatement.
---
### 2) Charging freight on behalf of your customers:
* If you pay freight on behalf of customers and **recover the freight amount from them**, this is called **reimbursement** of freight.
* **How to show this in your invoice:**
* **Best practice is to bifurcate freight and service tax separately in the invoice, i.e.:**
* Value of goods: Rs. XXXXX
* Sales Tax / VAT: Rs. XXX
* Freight Charges (basic): Rs. YYYYY
* Service Tax on Freight (calculated on abated value): Rs. ZZZZZ
* This provides clarity to customers and the tax authorities on the components of your invoice.
* If you simply show “Freight Charges Rs. XXXXX (including service tax)” lump sum without bifurcation, it’s not ideal and could raise questions during audit or assessment.
---
### 3) Service tax liability when no bill/receipt from transporter:
* If you pay freight charges **in cash or petty cash** without receipt/invoice from transporter, **you are still liable to pay service tax under reverse charge** on the freight amount paid.
* However, since you have **no tax invoice to claim credit**, you cannot take CENVAT credit on that service tax.
* Also, lack of invoice/documentation is not an excuse for non-payment of service tax under RCM.
---
### Summary for you:
| Scenario | Action / Tax Implication |
| --------------------------------------------- | --------------------------------------------------------------- |
| Paying freight on purchase of goods | Pay service tax under RCM if transporter unregistered; else no. |
| Recovering freight from customers | Bifurcate freight & service tax separately in invoice. |
| No bill/receipt from transporter (petty cash) | Pay service tax under RCM, but no credit can be claimed. |
---
**Additional Suggestion:**
Please ensure you get proper invoices from transporters for freight paid so that you can claim CENVAT credit where applicable.
---
If you want, I can help you draft a sample invoice format or guide you through specific circulars or notifications relevant to your query. Would that be helpful?
---
### 1) Paying service tax on freight charges as a GTA-registered trader:
* **You mentioned paying service tax @ 12.36% after 75% abatement.**
— The current (as per recent amendments around 2015) abatement for GTA services is **70%**, so the taxable value is 30% of freight charged.
— Hence, the effective service tax rate is **12.36% on 30% of freight charges**.
* **So, if you are paying service tax on freight charges paid for purchase of goods (carriage inward):**
— If the transporter is registered and charging service tax, you don’t pay service tax under reverse charge.
— If transporter is not registered, you pay under reverse charge mechanism (RCM) on freight inward.
* **If you are registered as a GTA yourself, you charge service tax on freight charged by you to customers** after abatement.
---
### 2) Charging freight on behalf of your customers:
* If you pay freight on behalf of customers and **recover the freight amount from them**, this is called **reimbursement** of freight.
* **How to show this in your invoice:**
* **Best practice is to bifurcate freight and service tax separately in the invoice, i.e.:**
* Value of goods: Rs. XXXXX
* Sales Tax / VAT: Rs. XXX
* Freight Charges (basic): Rs. YYYYY
* Service Tax on Freight (calculated on abated value): Rs. ZZZZZ
* This provides clarity to customers and the tax authorities on the components of your invoice.
* If you simply show “Freight Charges Rs. XXXXX (including service tax)” lump sum without bifurcation, it’s not ideal and could raise questions during audit or assessment.
---
### 3) Service tax liability when no bill/receipt from transporter:
* If you pay freight charges **in cash or petty cash** without receipt/invoice from transporter, **you are still liable to pay service tax under reverse charge** on the freight amount paid.
* However, since you have **no tax invoice to claim credit**, you cannot take CENVAT credit on that service tax.
* Also, lack of invoice/documentation is not an excuse for non-payment of service tax under RCM.
---
### Summary for you:
| Scenario | Action / Tax Implication |
| --------------------------------------------- | --------------------------------------------------------------- |
| Paying freight on purchase of goods | Pay service tax under RCM if transporter unregistered; else no. |
| Recovering freight from customers | Bifurcate freight & service tax separately in invoice. |
| No bill/receipt from transporter (petty cash) | Pay service tax under RCM, but no credit can be claimed. |
---
**Additional Suggestion:**
Please ensure you get proper invoices from transporters for freight paid so that you can claim CENVAT credit where applicable.
---
If you want, I can help you draft a sample invoice format or guide you through specific circulars or notifications relevant to your query. Would that be helpful?
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