Dear Learned Professional.
I have a querry to which I would like your valued suggestions
"A" is a public ltd. company wants some of its goods to be transported by road. It gives the job on contract to to "B" a private limited company. "B" In turn sub contracted the job to "C" an individual and "D" a partnership firm.
1. What is the service tax liability on each party?
2. If any one can avail abaitement or CENVAT? If so, the basis of that.
With Best Regards,
Mohammad Ayub
Thank you Mr Kulkarni for so prompt reply.
1. If the transaction between A and B is taxable in any body's hand?
2. B is only a contractor in between contractee and subcontractor. Should it bear the burden of service tax of 14%?. I am asking this question because normally the margin of contractor is not as big as service tax rate.
With Regards,
Mohammad Ayub
Dear Mr. Kulkarni,
I am putting my question once again.
The goods of A is to be transported. A will pay the frieght. A asked B to do the transportation. B used the vehicles of C and D.
Regards,
Mohammad Ayub
B is liable to pay the Service Tax. And if B avail CENVAT then he will not be entitled for abatement and he will have to pay the service tax on full amount.
If B do not avail CENVAT Credit he will have to pay the service tax on only 30% of freight amount.
Thank you Mr. Sinha for so nice advice. I am bit confusion of following,
1. Transportaion expense shall be booked by A in its books of accounts.
2. B will have both Transporting income (for billing to A) and Transporting expenses (for billing from C & D).
a. Should B add 30% service tax on its billing to A and deposit the same to the Govt.? In that case would appreciate the section or circular on the basis of which it can be done.
b. Should B pay 30% service tax on the Transporting expenses (for billing from C & D). In such case can B get CENVAT of such amount to be deposited to Govt.? This will cut the margin of B and normally the margin is far below the service tax to be paid.
Would appreciate your suggestion.
Thanks & Regards,
Mohammad Ayub
As per Negative List of Service Tax Point No. 22 "Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods;" is not taxable. So service provided by C & D to you will not be taxable for service Tax.
Now Either Transporter or Consignee/Consignor can pay the Service Tax. So you can pay the service Tax. If you avail CENVAT Credit then you have to charge service tax on full amount @ 14%. And if you do not avail CENVAT Credit, you have to charge the Service Tax on 30% of Service Value @ 14%.
Hope above will clear your confusion.
CAclubindia
