Transport Charges

[HEMANT GUPTA]

I have little confusion regarding service tax so please clarify the same.

Case:-

We charge in invoices freight as transportation charge of ₹ 100000 but we pay to Transporter of ₹ 55000.00 only.

Confusion 1. Whether Service tax would be charge on ₹ 100000 under Business Auxiliary Services or Not.

Confusion 2. Whether Service tax would be charge on ₹ 55000.00 under GTA or not.

Confusion 3. If we pay Service Tax on both i.e. ST on ₹ 100000 under Business Auxiliary Service and ST on ₹ 55000 under GTA (Reverse Charge) then it would be double taxation. Whether it is right or not.

[Rajagopalan Ranganathan]

Sir,

If Transport charges of ₹ 55000/- is paid by you then under reverse charge mechanism as a consignor you are liable to pay the service tax but you cannot avail the credit of service tax paid by since it cannot be treated as input service for you. It is input service only to your consignee. It is the normal practice of excise assessees to despatch the excisable good to the consignee on 'TO PAY' basis.

If you indicate ₹ 1,00,000/- as freight in your invoice then it will be treated as transport charges charged by you and you have to pay service tax only on that amount. The Department is not concerned what you have actually paid to the Transporter for levy of service tax. However, for excise valuation purpose the difference between ₹ 1,00,000/- and ₹ 55,000/- will be treated as part of your transaction value and excise duty will be demanded by the Department on the differential amount.

[DR.MARIAPPAN GOVINDARAJAN]

Thanks for nice explanation, Shri Rajagopalan, Sir

[MUKUND THAKKAR]

Agree with the Rajagopalan Ranganathan.

AI Summary

Service tax on transport charges: invoiced freight is taxable and consignor reverse charge creates separate liability and credit limits.
If a seller invoices freight to a buyer, service tax is leviable on the invoiced freight irrespective of the lesser amount actually paid to the transporter. A consignor who pays the transporter under the reverse charge mechanism must discharge service tax on that payment but cannot claim it as input service credit; credit may be available to the consignee. The difference between invoiced freight and paid freight will be considered in excise valuation and may attract duty on the differential.