Service tax on freight charges under negative list-reg

Sir,

We are paying excise duty on EX-Works supply price (Place of Removal is our Factory gate) as per customer contract, billed to our customer . We also undertake to deliver the goods dispatched from our factory to our customer site by engaging a Transport carrier . The consignment note issued by Transport carrier is sent to our customer for taking delivery of the goods at the destination .

In case of supply of goods to our Customers separate price for Freight Charges is available in the Contract. This price is Lumpsum price and irrespective of actual Freight Charges incurred the price will be realized from customer based on agreed billing rate per Kg. We are paying the freight charges to the Transport carrier for the transportation of the goods to customer site. We are also paying the applicable Service Tax on Outward freight after availing 75% abatement on the value of freighrt charges paid to Transport carrier and claim the same from our Customer along with Freight Charges.

In this regard please clarify whether the freight charges billed to customer on Lumpsum basis will be liable for Service Tax. If so whether we can take credit of Service Tax paid on GTA Service for outward freight. In some cases we are billing the actual freight charges incurred, from the Customer. Pl. clarify whether Service tax is payable by us in such cases.

This is the practice upto 30.6.12.

Under these circumstances please clarify the following under Negative list regime of Service tax:-

1. Whether we can continue the existing practice from 1.7.2012 also?

2. Whether we are liable for service tax in respect of freight charges billed to our customer ?.

a. If so whether we can claim abatement of 75% available for GTA service or service tax is to be paid on 100% invoice value for freight charges billed to customer?

b. If so whether we can claim cenvat credit of service tax paid by us in respect of payments made to GTA ie after availing 75% abatement?

3. If not whether our customer as receiver of transportation service is liable to pay service tax as per notification 30/2012 ST Sl No 2 read with 26/2012 ST sl.no 7 dt 20.6.12?

a. If so whether our customer can claim abatement of 75% of our invoice value for freight charges?

b. If so whether we our customer can claim cenvat credit of the service tax paid by him as receiver of service as an input service if he is an excise assessee?

1. GTA service is used after clearing the goods from your factory, i.e its not part of your assessable value.

2. Service Tax is levied from the consignor or consignee, who pays the amounts to the transporter.

to avail input credit, your exsiable clearance value must cover the lumpsum or actual transport charges billed or actual paid.

as the transport charges are not fulfiing the criteria of input service , coz you have availed the service AFTER clearing the goods, the input credit is inadmissible, despite of the fact that service tax liability is borne by yourself,

you have two choices,

1) include the transport value in assessable value and pay ED on the same, and pay service tax to transport and avail input credit of same.

2) book the goods on TO PAY Basis and dont pay to transporter by consignee.