Service tax on outward transportation post 2008
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 August 2012
Can I take credit of Service Tax on Outward Transportation if:
1)Goods are dispatched from factory directly to customer
2)Ownership as per sales order is getting transferred on delivery of the goods to customer.
3) Intransit Insurance and transportation is not separately charged to customer but is included in the Total Price.
If Yes, Pl provide the relevant act and provision?
1)Goods are dispatched from factory directly to customer
2)Ownership as per sales order is getting transferred on delivery of the goods to customer.
3) Intransit Insurance and transportation is not separately charged to customer but is included in the Total Price.
If Yes, Pl provide the relevant act and provision?
22 August 2012
as per your query the place of sale is the customer premises, so the GTA service so availed pass the test of input service. provided you have paid ED on gross value including the freight and insurance.
22 August 2012
Yes You can take the credit in view of High Court Judgment in Ambuja Cement of 2009.
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 August 2012
As per definition of " place of removal mean:
1)....
2)....
3) ...................
from where such goods are removed."
The last line emphasises the removal of goods and in this case my removal is factory.
Further as per Nikhil reply for Ambuja case : The decision was for cases prior to 2008 when the word was "from place of removal"
1)....
2)....
3) ...................
from where such goods are removed."
The last line emphasises the removal of goods and in this case my removal is factory.
Further as per Nikhil reply for Ambuja case : The decision was for cases prior to 2008 when the word was "from place of removal"
24 July 2025
Here’s a detailed explanation regarding **Service Tax credit on outward transportation post-2008** based on your points and relevant rulings:
---
### Your Situation:
1. Goods dispatched **directly from factory to customer**.
2. Ownership transfers **on delivery at customer’s location**.
3. Transportation and insurance charges are **included in the total price** (not separately charged).
---
### Can you take Service Tax Input Credit on Outward Transportation?
**Short Answer:**
**Yes, you can take input credit on service tax paid on outward transportation (e.g. GTA service),** provided it meets conditions of "input service" and input tax credit rules, with supporting case law and legal provisions.
---
### Explanation:
#### 1. **Place of Removal & Ownership Transfer**
* The definition of “place of removal” in Central Excise / Service Tax Laws is critical.
* Before 2008, the "place of removal" was interpreted as the point from which goods were dispatched, typically the factory.
* After 2008, the words changed to “place of removal,” but the High Court rulings (e.g., **Ambuja Cement case, 2009**) held that credit for service tax on outward transportation could be availed when goods are dispatched from factory directly to the customer, even if ownership transfers on delivery.
#### 2. **Input Service & Eligibility for CENVAT Credit**
* The transportation service (GTA or other freight service) is an **input service** if used in relation to manufacture, removal, or delivery of goods.
* Outward transportation service is eligible for **CENVAT credit** as it is related to the delivery/removal of finished goods.
* Since transportation charges are included in the total price and you have paid service tax on the freight (either directly or embedded in price), you can claim credit.
#### 3. **Relevant Provisions & Case Laws**
* **Rule 2(l) of CENVAT Credit Rules, 2004** defines input services.
* **CENVAT Credit Rules, 2004** permit credit on GTA services used for outward transportation.
* The **Ambuja Cement (2009) judgment** upheld credit on freight paid on outward transportation.
* Various High Courts and CESTAT rulings have supported input credit on outward freight where goods are dispatched directly from factory.
---
### Important Notes:
* The credit is available only if **service tax is actually paid on the outward transportation service**.
* If transportation is bundled with goods price and not separately invoiced, ensure service tax on the freight component is paid.
* Maintain proper documentation (invoices, freight bills, service tax paid documents) for credit claims.
---
### Summary:
| Point | Position |
| ---------------------------------------------------------------- | ---------------------------------------------------------------------- |
| Goods dispatched from factory directly to customer | Place of removal = factory → eligible for credit. |
| Ownership transfers on delivery at customer premises | Does not affect input credit eligibility. |
| Freight & insurance included in total price (no separate charge) | Credit available if service tax paid on gross price including freight. |
---
If you want, I can help you draft a legal note citing sections and case law excerpts for your records. Would you like that?
---
### Your Situation:
1. Goods dispatched **directly from factory to customer**.
2. Ownership transfers **on delivery at customer’s location**.
3. Transportation and insurance charges are **included in the total price** (not separately charged).
---
### Can you take Service Tax Input Credit on Outward Transportation?
**Short Answer:**
**Yes, you can take input credit on service tax paid on outward transportation (e.g. GTA service),** provided it meets conditions of "input service" and input tax credit rules, with supporting case law and legal provisions.
---
### Explanation:
#### 1. **Place of Removal & Ownership Transfer**
* The definition of “place of removal” in Central Excise / Service Tax Laws is critical.
* Before 2008, the "place of removal" was interpreted as the point from which goods were dispatched, typically the factory.
* After 2008, the words changed to “place of removal,” but the High Court rulings (e.g., **Ambuja Cement case, 2009**) held that credit for service tax on outward transportation could be availed when goods are dispatched from factory directly to the customer, even if ownership transfers on delivery.
#### 2. **Input Service & Eligibility for CENVAT Credit**
* The transportation service (GTA or other freight service) is an **input service** if used in relation to manufacture, removal, or delivery of goods.
* Outward transportation service is eligible for **CENVAT credit** as it is related to the delivery/removal of finished goods.
* Since transportation charges are included in the total price and you have paid service tax on the freight (either directly or embedded in price), you can claim credit.
#### 3. **Relevant Provisions & Case Laws**
* **Rule 2(l) of CENVAT Credit Rules, 2004** defines input services.
* **CENVAT Credit Rules, 2004** permit credit on GTA services used for outward transportation.
* The **Ambuja Cement (2009) judgment** upheld credit on freight paid on outward transportation.
* Various High Courts and CESTAT rulings have supported input credit on outward freight where goods are dispatched directly from factory.
---
### Important Notes:
* The credit is available only if **service tax is actually paid on the outward transportation service**.
* If transportation is bundled with goods price and not separately invoiced, ensure service tax on the freight component is paid.
* Maintain proper documentation (invoices, freight bills, service tax paid documents) for credit claims.
---
### Summary:
| Point | Position |
| ---------------------------------------------------------------- | ---------------------------------------------------------------------- |
| Goods dispatched from factory directly to customer | Place of removal = factory → eligible for credit. |
| Ownership transfers on delivery at customer premises | Does not affect input credit eligibility. |
| Freight & insurance included in total price (no separate charge) | Credit available if service tax paid on gross price including freight. |
---
If you want, I can help you draft a legal note citing sections and case law excerpts for your records. Would you like that?
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