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Service tax

SHYAMA PRASAD BASU (ACCOUNTS EXECUTIVE) (44 Points)

06 December 2011

Dear all friends & seniors,

I am eager to know whether service receiver is liable to pay service tax in case of freight charges already included in vendors invoice and paid by service receiver ?

Thanks to all in advance.

With Regards

S.P.Basu

Accounts Executive

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9 Replies

Sagar Devani (Corporate and International Taxation) (1174 Points)
Replied 06 December 2011

As per my knowledge the service reciever has already paid servicee tax to service provider. So there why would he pay it again

Balaji (Articled assistant & CA final) (117 Points)
Replied 06 December 2011

In case of Goods Transport Agency (GTA), Import of Service, Sponsorship service and Agent of mutual fund and insurance, service tax is payable by service receiver.

Sagar Devani (Corporate and International Taxation) (1174 Points)
Replied 06 December 2011

i know it is payable by the service reciver but when service provider has already charged it in the invoice and collected it from service reciever, why would service reciever would pay it again?

swati (Article Assistant) (56 Points)
Replied 07 December 2011

no. Then u r not required to pay. Its on one of the two sides... read goods transport agency and good transport by road together. U will understand better

Satish (CA Final Student) (479 Points)
Replied 07 December 2011

The case is like this -

a) The vendor has arranged the transporter to transport the goods to the buyer

b) The vendor has decided the freight payable to the transporter & paid it

c) The vendor has charged to the buyer, in addition to the price of the goods, transport charges which have been paid by him to the transporter.

d) The buyer has paid full amount including transport charges to the vendor.

Here nowhere mentioned that the service tax is paid. So, applying the applicable provisions of transport of goods by road -

Option - 1 - Transporter can charge in his invoice or consignment note the amount of service tax in addition to freight & pay it to the govt.

Option - 2 - Service tax can be paid by consigner or consignee who is paying freight if he is not a proprietor or individual. In such case, the consignment note shall contain a tick on the check box against the clause "person responsible for paying service tax"

In the given case, since consignor has paid freight to transporter & presuming that he is not a proprietor or individual, he should pay service tax as a recipient of service. He can then get it reimbursed from the consignee (buyer) along with amount of freight.

SHYAMA PRASAD BASU (ACCOUNTS EXECUTIVE) (44 Points)
Replied 07 December 2011

Dear Seniors & Friends,

Thanks to all of you for your valuable replies. I would like to add one more thing that in the above case neither Transporter nor the consignor mentioned amt of service tax separately in their consignment note / invoices.

So what would be the consequences on the consignee if he does not pay service tax to the Govt being the ultimate service receiver ?

Thank you in advance.

Yours

S.P.Basu

Rohan (Consultant) (91 Points)
Replied 07 December 2011

In case of Transporter, THE PERSON WHO IS MAKING THE PAYMENT TO THE TRANSPORTER IS LIABLE TO PAY SERVICE TAX.

This has bigger implication from the Departments point of view... and department always catched the neck of these parties since the accounting of transportation charges is recorded in their bookings of accounts. This services could be under many heads, CARTINGS, FREIGHT INWARD/OUTWARDS, TRANSPORTATION EXPENSES...etc.

Now things are pretty safe, if they collect service tax from you and pays it provided they mention the service tax registration number in their invoice.

However, Department would always catch hold of the person who is liable to pay... even though the transporter has paid the service tax. Department have challenged and they have won the case at tribunal as well. i/e because there's no where in the law which allows the transporter to pay tax. See below,

"Consignor or Consignee is liable to pay service tax in relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is,—

(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) any company ¹¹[formed or registered under] the Companies Act, 1956 (1 of 1956);

(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e) any co-operative society established by or under any law;

(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or

(g) any body corporate established, or a partnership firm registered, by or under any law,

any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage"

Rohan (Consultant) (91 Points)
Replied 07 December 2011

Well for the later query.... what if you dont? haha....

FACE THE WRATH.

Satish (CA Final Student) (479 Points)
Replied 09 December 2011

What matters is the "Service" to attract the service tax. If the consignee receives the service directly from the transporter & obliged to pay freight as a recipient, consignee is liable to pay service tax and all the provisions of service tax would be applicable on him. So, just check anywhere the consignee is directly liable to pay freight to transporter based on consignment note.