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

AI Summary

Service tax on freight recovery may apply where excess freight is retained as business support service, affecting tax liability.
Freight recovered by a seller is taxable depending on classification: if a GTA liability may fall on the consignor/consignee under reverse charge; if an organised courier or air cargo operator charges service tax, that operator generally bears the tax and the seller is not liable under reverse charge. Any excess amount retained by the seller may be treated as a business support service and attract service tax, with input tax credit available for tax paid to the transporter. Exemptions for certain road transport services may also affect applicability.