s.tax charged on freight in ecisable invoice

[Guest]

dear experts,

i have query regarding s.tax on freight in (GTA) , can we charge s.tax on freight to party in excisable invoice ?

suppose if we charge freight separately in excisable invoice and s.tax can be recovered from party ?

regrads,

Manan Pandya

[Rajagopalan Ranganathan]

Sir,

Service tax can be charged and collected by the service provider. In your case you are not the service provider. Hence you cannot charge service tax on freight indicated in the excise invoice.

[Guest]

thank you sir,

for your reply.

regards,

Manan Pandya

[Guest]

sir,

is there any notification / circular about this clause , not to claim / charge s.tax on freight in excisable invoice?

if it is pls. suggest or provide .....

regards,

Manan Pandya

[Ganeshan Kalyani]

Dear Rajagopalan sir,In practice some companies are charging service tax on invoice to recover the freight cost from the customer. what could be the implications. The company pay freight and also pays service tax under reverse charge.

[Rajagopalan Ranganathan]

Sir,

Only an output service provider is empowered to pass on service tax credit to the receiver of the service. In respect of GTA a consignor/consingnee is required to pay service tax on such service. If the consignee pay the service tax on reverse charge basis he can take the credit. If consignor pays the service tax he cannot avail the credit and he cannot pass on the credit through his invoice. If he do so at end of service receiver, the department will take the stand that the receiver is not eligible to take the credit since consignor is not output service provider.

Rule 2 (p) pf CENVAT Credit Rules, 2004 defines output service as “output service” means any service provided by a provider of service located in the taxable territory but shall not include a service,-

(1) specified in section 66D of the Finance Act; or

(2) where the whole of service tax is liable to be paid by the recipient of service

Clause 2 above clearly excludes the consignor from passing on the service tax credit paid by him under reverse charge mechanism.

[Guest]

Dear Rajagopalan Sir,

Your explanation looks convincing but if the Supplier (Consignor) collects service tax on freight in the excisable invoice from the Consignee (manufacturer) in such case what is wrong in availing the Service tax which they paid to the Consignor.

Please revert back to my doubt.

Regards

CA Praveen Kumar

[Rajagopalan Ranganathan]

Sir,

A consignor is sending excisable goods to the consignee. The goods sent by consignor is input to consignee. GTA used for sending the goods to consignee is 'input service' to consignee only. Cenvat credit of service tax paid on output service (here GTA service) can be taken by the consignee only. As already explained consignor though he discharges service tax liability under reverse charge mechanism cannot be equated to output service provider and output service provider cannot avail the cenvat credit of service tax paid on the service provided by him. This is like a manufacturer who pays excise duty on the excisable goods manufactured by him cannot avail the credit of duty paid on the excisable goods manufactured by him. That is why the government has exempted captively consumed excisable goods used in the manufacture of dutiable final excisable goods from payment of excise duty. Therefore a consignor cannot avail the credit.

[Guest]

Sir,

As you mentioned on dated 17.09.2015 that if Consignor pays the Service tax he cannot avail the credit and he cannot pass on the Credit through his Invoice. What does it mean ??

In my case the supplier (consignor) charged the freight plus service tax on the excisable invoice and collected service tax from the consignee (manufacturer) and based upon the payment (service tax) made to the supplier we (consignee) are availing the service tax input.

Is there anything wrong in that ??

Pls revert back to the above case.

Thank you.

[Rajagopalan Ranganathan]

Sir,

Please wait until your accounts are audited by internal audit department of Commissioner of Central Excise (Audit) having jurisdiction over your factory. Again we will discuss this aspect.

AI Summary

Service tax charging on freight: consignor paying under reverse charge cannot pass CENVAT credit to consignee. Service tax on freight may be charged only by the service provider; a consignor who pays service tax under reverse charge is not an output service provider and cannot pass CENVAT credit through an excisable invoice. GTA services used to transport excisable goods constitute an input service for the consignee, and only the consignee (if liable or if it pays the tax) can legitimately take CENVAT credit. Attempting to recover service tax from the consignee via an excise invoice when the consignor discharged tax under reverse charge risks denial of credit and audit scrutiny.