Dear Mr.Manish,
Service Tax on Goods Transport Agency: An analysis of person who is liable to pay Service Tax”
Generally there is a notion that transporter is exempted from payment of service tax and only the person who pays the freight is liable to pay service tax. But it is not the case, still transporter is liable to pay service tax if the service recipient is other than the following as per the notification No.30/2012- Service Tax.
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;
(c) any co-operative society established by or under any law;
(d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under;
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons;
The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.
Further Services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road only covered under this notification.
If the freight is paid to any person other than goods transport agency, then this notification will not apply.
Transport business is running in manifold manner i..e a person who does not have any goods carrier will provide transport arrangement wherein he will be providing consignment note etc.
In some of the cases transporter is providing service to the body corporate through the middlemen who in turn co-ordinating with the person who is paying the freight. For example Mr. A is acting as middle men between ABC limited and the transporter. Transporter is providing transport service to the XYZ Limited on behalf of Mr. A and Mr. A is paying the freight to the transporter. Finally Mr. A got reimbursement of the freight amount form ABC limited and received commission for his services. ABC Limited raises freight bill to the XYZ limited with its margin.
In the above example we need to identify the following:-
- Goods transport agency
- Person who paying the freight to the transporter
- Person liable to pay service tax
- Is transporter is liable to pay service tax?
Goods transport agency: As per section 65B (26) "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Here we are able to identify the goods transport agency.
Person who is paying the freight to the transporter: Here the person who is paying the freight to the transporter is Mr. A but he is not the receiver of service. He is acting as middle men between ABC limited and the transporter. And also as per the understanding between Mr. A and the transporter, transporter is raising consignment note in favour of XYZ Limited who is the actual consignee also. If we look into the reverse charge mechanism Mr. A is not covered under the reverse charge mechanism and transporter is liable to pay service tax. From the point view of the transporter he is providing his service to the body corporate and also raising consignment note in favour of body corporate i..e XYZ limited. Hence he cannot pay service tax.
Person Liable to pay service tax: in this scenario who will be the person liable for payment of service tax. As far as the transporter is concern he is rendering service to the body corporate and hence not liable to pay service tax. As far as Mr. A is concern is the individual is not liable for payment of service tax under reverse charge mechanism. As far as ABC Limited is concern there is no document connectivity to constitute freight payment as this is only reimbursement from XYZ limited and also there is no consignment note in favour of ABC Limited. As far as XYZ Limited is concern there is no separate freight payment as this freight payment is included in the material cost in the invoice raised by ABC Limited.
If this is the contention, who will be paying the service Tax on freight? Will continue.......
Courtesy:TMI
CAclubindia
