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 Applies on Actual Payment of 55,000 Under Reverse Charge; Excise Duty on 100,000 Invoiced Amount A user inquired about service tax obligations on transportation charges, specifically whether service tax should be applied to the full invoice amount of 100,000 or the actual payment of 55,000 to the transporter. Rajagopalan Ranganathan responded, explaining that under the reverse charge mechanism, the user must pay service tax on 55,000 as the consignor, but cannot claim it as input service credit. The 100,000 invoiced amount is subject to service tax, and the difference between 100,000 and 55,000 affects excise valuation, with excise duty applicable on the differential. Other participants agreed with this explanation.