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Reverse charge mechanism

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Our client is paying frieght to a goods transpot agency,is our client is liable to pay service tax on reverse charge mechanism.

our client is manufacturing of yarn,spinning mill,is there any exception to the aforesaid case by virtue of spinning mill.

our client is company(pvt ltd) and consignor is also a company

pls clarify it quick.

thank you

Replies (2)

Your client is liable to pay service tax on 25% of the total gross amount under reverse charge mechanism, if ALL the following conditions are satisfied :

1. If gross amount charged on a consignment transported in a single goods carriage is or exceeds one thousand five hundred rupees

2. If the the goods transport agency in the consignment note issued makes a declaration that neither credit on  inputs or capital goods [now  input services also] used  for provision of service has been taken  nor  the  benefit  of  Notification  no.  12/2003-Service  Tax  has  been  taken  by  them.

Further, exemption from payment of service tax on GTA service is provided only in the following cases:

1. Vegetable

2. Fruit

3. Eggs

4. Milk

5. Food Grains and Pulses. 

If person liable to pay is in the specified category then the person making payment of freight is liable to pay service tax. In your case since, your case person making the payment of freight is in specified category and is therefore liable to make payment of service tax.

Exemption is not availabe for trasnportation of yarn, spinnning mills


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