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Service tax on transportation exp

Neha Mishra (@student) (234 Points)

24 May 2014

Dear sir

We are a PVT ltd

I want to know whether we are required to pay Service tax under RCM only for Transporation Expense paid for Purchase of RMs

or we should also pay Service Tax on Transporation paid on Sales too

Further

Cenvat credit on the same ?

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8 Replies

CA Sanket Gujar (Professional) (74 Points)
Replied 24 May 2014

As per RCM, you would be required to pay service tax on 25% of the transport bill, if you are making the payment to the transporter.

1 Like

Danish (GST Practitioner) (219 Points)
Replied 24 May 2014

Hi,

Sanket Ji, Please Advise I Have read the .Notification No.15/2012-Service Tax, And I understood, Receiver Of Service From Transport Agency Has to Pay 100% Tax Only IF Receiver Is-

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 thereunder;(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;

So My Question Is We have to pay 100 % Tax On Receiving Goods (Receiver Of Service)?

And 0% TAX on Providing Such Service

Please Advice

Vikas (CA) (1135 Points)
Replied 26 May 2014

Dear Danish,

Firstly, note that you are referring to a wrong Notification which has been substituted by 30/2012-ST dated 20 June 2012. However, the extract remains the same.

Secondly, the point here is - who is paying to the transporter. Meaning, if you are falling any of the aforesaid categories such as factory and are making payment to the transporter, then you will be liable to pay the required service tax.

Thirdly, if the transportation services are provided by a GTA (Goods Transportation Agency), then in that case, you would only be required to 25% of the total Service Tax (refer Notification No.26/2012-ST dated 20 June 2012)

Lastly, there are certain exemptions provided under this category under Notification No.25/2012-ST dated 20 June 2012.

I hope I have resolved your query.

1 Like

Danish (GST Practitioner) (219 Points)
Replied 26 May 2014

Thankyou so much sir

Vikas (CA) (1135 Points)
Replied 26 May 2014

Your welcome Danish,

Sorry I overlooked the second query of Neha, relating to availability of Cenvat credit.

So the answer should be that you may claim the Cenvat credit only on the inward transportation of goods as per Rule 2(l) of the Cenvat Credit Rules, 2004.

Neha Mishra (@student) (234 Points)
Replied 26 May 2014

So Vikas sir

it means we should pay S.TAX on both transportaion expenses i.e. for sales and purchase

but we can only claim cenvat for purchase transportation i.e. Inward and not for outward

is it ?

Vikas (CA) (1135 Points)
Replied 27 May 2014

Almost yes…

If you are making payment to the GTA, then you are liable for payment under reverse charge for both i.e., inward as well as outward transportation. But Cenvat shall only be eligible for all the inward transportation and for outward transportation only upto the place of removal, as per Rule 2(l) of the Cenvat Credit Rules, 2004.

The place of removal has been defined under Section 4(3)(c) of the Central Excise Act, 1944 -

“place of removal” means -

(i) a factory or any other place or premises of production or manufacture of the excisable goods;

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without [payment of duty;

(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;”

So effectively, Cenvat credit on outward transportation is generally neglible.

For better understanding, read the entire definition of the ‘input service’ under Rule 2(l) of the Cenvat Credit Rules, 2004.