Service Tax on Debit Notes

[Guest]

Dear Professionals,

Pl. tell me in the below cases where I have to Raise Debit Notes, Service Tax will be charged or not:

      a)    For goods damaged in Transit for Receipt(purchases) cases :: Transporter debited                  and Freight credited

1. For goods damaged in Transit for IDT (dispatch) cases            :: Transporter debited and Freight credited
2. For goods damaged or late delivered for other dispatches(customer & dealer sales): Transporter debited & Customer/Dealer credited
3.  For converting To-Pay Bill of Customer to Billing of transporter:: Customer debited and Transporter Credited.

If YES then under which Category or if NO then justification for the same...

Pl. also take into care the Declared Service under Section 66E:

​​ 5.  agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

[YAGAY andSUN]

Section 66 E (V) is self explantory.  You would have to pay service tax accordingly.

[Velkumar S]

Dear Yogesh,Even for payment of service tax as recipient of service, the definition of taxable service has to be satisfied. In the case of damage / delayed delivery of goods, the amount debited to transporter account is in the nature of compensation for not complying with the conditions of transport and hence not in relation to service. Therefore, not liable to service tax. But, converting To-pay Bill by crediting Transporter account with freight will attract payment of service tax at the time of making payment to transporter as service recipient. Section 66E (5) in respect of agreeing to refrain from an act, etc will not be attracted as it is not an act arising from an agreement to do so for the service provided by the other person. For more clarity please refer para 6.7 of Service Tax Education Guide issued by the Department available in www.cbec.gov.in under link service tax drop down menu.Regards,Velkumar S

AI Summary

Service tax on transport compensation: compensation for damaged or delayed goods not taxable, but billing transporter attracts service tax. Two expert replies address whether debit note adjustments for damaged or late delivery of goods attract service tax. One asserts Section 66E(5) mandates service tax. The other explains that compensation debited to a transporter for breach of transport obligations is not consideration for a service and therefore not taxable, but converting a to pay bill into a charge on the transporter (making the payer the service recipient) attracts service tax; Section 66E(5) does not apply to the compensation scenario.