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Cenvat credit on freight recovered in purchase invoice
ABC Ltd. sells the goods to XYZ Ltd. The freight for transportation of the goods has been paid by ABC Ltd to the GTA. The consignment note is prepared on ?FREIGHT PAID? basis. ABC Ltd. collects this freight from XYZ Ltd., on actual basis including relevant Service Tax Amount, by separately showing it in the invoice, which is paid by XYZ Ltd., to ABC Ltd. ABC Ltd. is the person liable to pay freight. It cannot be said to be paying the freight on behalf of XYZ Ltd. ABC Ltd. is only getting reimbursement of the freight paid by it, initially. As such, the liability for payment of service tax will only be on ABC Ltd.
Question : Can XYZ Ltd avail CENVAT credit on inward transportation of goods as he has reimbursed the entire freight amount including service tax to ABC Ltd?
Replies (2)
In my opinion, cenvat credit can not be claimed in case of reimbursement of freight included in purchase invoice. The consignor is paying freight in his own capacity and not on behalf of the consignee. The consignment is wholly under control of the consignee.
Also the consignee is not liable to pay service tax under reverse charge mechanism.
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Originally posted by : Nisarg Modi |
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ABC Ltd. sells the goods to XYZ Ltd. The freight for transportation of the goods has been paid by ABC Ltd to the GTA. The consignment note is prepared on ?FREIGHT PAID? basis. ABC Ltd. collects this freight from XYZ Ltd., on actual basis including relevant Service Tax Amount, by separately showing it in the invoice, which is paid by XYZ Ltd., to ABC Ltd. ABC Ltd. is the person liable to pay freight. It cannot be said to be paying the freight on behalf of XYZ Ltd. ABC Ltd. is only getting reimbursement of the freight paid by it, initially. As such, the liability for payment of service tax will only be on ABC Ltd. Question : Can XYZ Ltd avail CENVAT credit on inward transportation of goods as he has reimbursed the entire freight amount including service tax to ABC Ltd? |  |
cenvat credit cannot be taken. If taken then all should be reversed immediately.
Read Rule 9 of CENVAT CREDIT RULES,2004
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