Applicability of Service Tax on Freight Recovery

[Rahul Bagaria]

My company is engaged in selling of medical products to various distributors across India.The agreement with the dealers in FOB (Freight on Board). However my company facilites the movement of goods through courrier and air cargo only and recover freight on estimate basis which is slightly higher than what we pay to Bluedart.

Am I suppose to charge Service tax on the freight recovery (which is normally higher than what I have paid) to BlueDart

[YAGAY andSUN]

Under GTA Services, whoever  (Consigner or Consignee) pay  the Freight is liable to pay the service tax on the abate/unabated value of the freight.

You are liable to pay the service tax on freight.

[sanjeev bajaj]

I agree with Mr. Khatri.

But the question is whether company is liable to recover service tax on freight charged in bill.

 

In my Opinion, NO, As company is not a GTA and the freight recovered from customer is not freight recovered as GTA.

 

[Ganeshan Kalyani]

The Service tax is payable by consignor or consignee whoever pays the freight. Further if you recover the amount from the distributor which may be higher it is your business call. But the differential amount collected high may be subject to service tax as it is your profit. See this aspect also.

[RAKESH R]

Mr. Rahul Bagaria

You have stated that you have sent the consignment through Bluedart and also through air cargo. In respect of amount paid to Bluedart, the same is for the courier service provided by them. You have not stated whether Bluedart has raised invoice charging 14% service tax on the entire value under the category of 'courier service' ? OR they have charged 14% on 30% value of invoice amount under the category of "GTA" service. In both situations, the service provider is a Company registered under the Companies Act. Hence, even if the service is under GTA, No service tax liability on you under reverse charge. The entire tax is payable by Bluedart.

Similarly, in the case of Air Cargo, the service provider is liable to pay service tax and the same is not under reverse charge.

In both the above situations, you are not liable to pay service tax under reverse charge.

With regard to excess money received from your client as freight over than actual amount paid to Bluedart / Aircargo, you are only facilitating the delivery mode to your customer. Hence, it is to be treated as business support service and you are liable to pay the service tax on the entire amount received from your customer. This is as per the new definition of service given in Section 65B of the Finance Act ( Activity by one person to another for a consideration). However, while doing so, you may take credit the service tax paid to Bluedart / Aircargo and pay the balance only to Service Tax Department.

Advised accordingly

S. Gokarnesan

Advocate

098400 87349

[Arti Gupta]

Please look the entry 66D(p) of Finance Act, 1994

(p) services by way of transportation of goods-

(i) by road except the services of-

(A) a goods transportation agency; or

(B) a courier agency;

Your service may be covered in this entry and accordingly you are not required to pay service tax on freight amount recovered from customer.

AI Summary

Debate Over Service Tax on Freight Recovery: Is the Company Liable as a Goods Transport Agency? A company selling medical products in India inquires about the applicability of service tax on freight recovery, which is higher than the actual freight paid to BlueDart. Responses vary: one suggests liability for service tax on freight, while another argues that the company is not a Goods Transport Agency (GTA) and thus not liable. Another opinion highlights that excess freight recovered could be subject to service tax as profit. It is also noted that service tax liability may not apply under reverse charge for services provided by registered companies like BlueDart or air cargo providers.