Applicability of service tax on transporation/ freight charges

[SANDEEP GUPTA]

Sir,

One of my client (Pvt. Ltd. co) who is engaged In providing logistics service to exporter and importers as well. company arrange transport vehicle from the open market, and such agency issue consignment note/ bilty/ lorry slip in fevour of this logistic company. Such logistics company do not issue any consignment note but raise a slip for taking receipt of goods only. Will such services be taxable under GTA or covered under negative list & not taxable at all.

Since transportation/ freight charges of truck, ship and airlines are paid by such company, please state whether liability will arise under service tax.

[Ganeshan Kalyani]

If you justify the nexus of availing of GTA service toward the bundled service it provides the credit will certainly be available.

[SANDEEP GUPTA]

Thanks for clarifying the issues,

It is clear that my client company should pay service tax on tpt. charges under RCM.

Now question is how much or what rate of service tax should they charged in the invoice and in which code this will be deposited and how it will be shown in ST-3.

Please clarify the matter.

[Ganeshan Kalyani]

Abatement on GTA service is 70%. The receiver of the service who pays freight should pay service tax on 30% of the freight amount under reverse charge. secondly the freight amount which would be recovered from their customer should have service tax [email protected]% on the invoice raised on them. The service tax so collected shall be paid under same heading as that of GTA since it is reimbursement of the freight charges with some profit element. this is my view.

[SANDEEP GUPTA]

Thanks u very much sir,

If my client company issue own consignment note and pay the vehicle hiring charges to agencies, in such situation what will be the position of taxability of input service and output service.

Further please also express your view whether freight charges paid to shipping and airlines (for to and from customer station) and then billed to customers with agreed rate, would be taxable output service or not. Please also justify the view taken.

Please waiting for reply.

AI Summary

Reverse charge on freight: payer of freight liable for service tax when logistics firms arrange transport.
Liability for service tax on freight arranged by a logistics company depends on who is 'paying or liable to pay freight' and on whether the company acts as principal or agent. If consignment notes are in the logistics company's name or it pays freight as principal and bills customers (including a margin), tax may be payable under reverse charge or as part of a bundled taxable service. Absence or change of nomenclature of a consignment note does not automatically negate GTA taxability. Cenvat credit is available only where a nexus between the GTA input and taxable outputs is established.