A pvt. ltd. company sells goods to another company and charged Rs 40000 as frieght. However it actually pays Rs 10000 to transportation comp. while paying service tax they calculate the tax on 40000. On enquiry they told that they considered themself as a service provider that is why they are paying tax on 40000 not 10000. Are they correct? or they should pay tax on 10000 as reverse charge
As this sale of Goods by one company(A) to other company(B) and freight(as a reiumbursement) is part of the contract of sale. Further to this under reverse charge Service Provider must be Goods Transport Agency and must have issued a consignment note for providing that service, so (A) is neither a GTA and nor issuing consignment note so (A) can't charge service tax on freight as this contract for sale not for service
that means tax will calculated on 10000?
In this case selling company is service receiver of GTA hence same is liable to pay service tax on 25% value of service received (i.e. 10000*25%), since seller has booked freight outward as Rs. 10,000 and made payment for same. Rs. 40000 has been credited to P& L Account as a income, hence no relevence for applicability of ST.
But the income is earned by providing transportation service to another company.......then also no need to charge service tax.....
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
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