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.

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.