Service Tax Liability (E-commerce transaction scenario)

[Pallav Singh]

Dear Sirs,

There are four companies in discussion - 'S' is Supplier,; 'C' is Customer, 'P' is e-commerce portal and 'T' is transporter.The arrangement is B2B and is explained as -

1. Customer 'C' orders material on the e-commerce portal of company 'P' to Supplier 'S'.
2. The e-commerce portal 'P' has taken responsibility to service the order and has got into agreement with transporter 'T' to pick the material from 'S' warehouse and deliver to location of 'C' by road.
3. The transporter 'T' will raise freight charges invoice on e-commerce company'P'(Say freight charge is ₹ 90/-)
4. E-commerce company 'P' raises an invoice to the Supplier 'S' mentioning freight charges component as ₹ 100/- (i.e mark up of ₹ 10/- is there in freight charges) along with payment of material cost as agreed between 'P' and 'S'.

As per Reverse Charge Mechanism, for Point 3 above, where Transporter 'T', a GTA, is providing transportation services to E-commerce company 'P' and freight charge is paid by 'P'. In this scenario, liability of S.Tax payment lies on 'P'. ie 4.35% of the freight value (4.35% of ₹ 90/-).

Questions:

1. Now 'P' an e-commerce company is charging freight to supplier 'S' as ₹ 100/- instead of ₹ 90/-. In this scenario, who is liable to pay Service tax on transportation (freight value ₹ 100/-). Can 'P' pay the S.tax to the department.
2. Say, If 'P' pays the S.Tax for the scenario in Question 1, then what is the net liability of 'P' on service tax considering input and output service tax.
3. What is the service tax liability of all four parties involved in the above arrangement.

Request your valuable suggestions and advise.

Regards,

Pallav Singh

AI Summary

Service Tax Liability on Marked-Up Freight Costs in B2B E-Commerce Under Reverse Charge Mechanism: Key Insights In a B2B e-commerce transaction, a customer orders materials via an e-commerce portal, which arranges for transportation from the supplier to the customer. The transporter invoices the e-commerce company for freight charges, which then marks up the freight cost when invoicing the supplier. The discussion centers on service tax liability under the Reverse Charge Mechanism, where the e-commerce company is liable for service tax on the original freight charge. However, since the e-commerce company marks up the freight cost, it also attracts service tax on the marked-up amount. The parties seek clarity on the tax implications for all involved.