IS SALES TAX / VAT APPLICABLE FOR TRANSPORTERS.

[Anish Gupta]

Dear Sir,

Please help me. Firstly I would like to inform you that my firm is a Govt. Contractor (Railways & Defence). Now, is Sales Tax / VAT or Service Tax is applicable on us because we Transport Railway Components (Used & New Spare parts of Locomotives) on annual contract basis.  As of now I do think that Service Tax is exempted as per their exempted list.

[vidhi bansal]

No, Your firm is not exempt from payment of service tax. Because it falls under exclusion part of exemption.(service provided  by govt.in respect of Trasportation of goods & passengers ). 

[rishi mohan]

Sales/vat shall be applicable on the goods supplied or transported. Vat at an appropriate rate shall be applicable.

[Anish Gupta]

Dear Rishi & Vidhi,

First of all thanks for your cooperation. But the nature of job done is purely transportation i.e. on specific work Orders we just place a Truck of the desired capacity and the material loaded by us is Govt. property and not my i.e. I only place the Lorry. Suppose I am given a WO from Railways to bring an Transformer of Railways i.e. from Northern Railway to Eastern Railway. The property lying at Northern Railway is of Govt. of India and after transportation to Eastern Railway the same again remains a property of Govt. of India. My job is just that of a Goods Transport Agency. That is I am not transporting materials from a supplier or manufacturer. Waiting for your replies....

[vidhi bansal]

service tax will levy ,however vat /sales tax would not be applicable because you are not not selling any thing. however on that goods that are transported by you may be liable for vat-as per condition.

as per discussion you are providing the transportation service to govt. so you are liable to pay service tax under reverse charge mechanism. you can also take a benefit of rebate( 40 percent taxable)

AI Summary

Service tax on transportation services applies under reverse charge for government property transport; VAT concerns may arise on goods. Transport of government-owned goods under contract by placement of vehicles does not amount to a sale and so VAT/sales tax generally will not apply to the transporter's receipts, though the goods moved may have VAT implications; conversely, the activity is a taxable transportation service falling outside the cited exemption and is subject to service tax, with liability said to arise under the reverse charge mechanism and a partial taxable rebate potentially available.