Service tax on transportation by supplier of Goods

[Shyam Naik]

Dear All,

We are purchasing Charcoal from one supplier.

The supplier has quoted price of ₹ 400 per ton + applicable Sales Tax. The supplier shall also undertake the transportation of the goods to our plant and charge ₹ 700 per ton.

Whether we are liable to pay service tax on RCM basi

[Ganeshan Kalyani]

From your query it seems that supplier is taking care of freight expenses. He would arrange for freight and pay freight to the transporter. Hence the liability to pay service tax befalls on him. Thanks.

[KASTURI SETHI]

I concur with views of Sh.Ganeshan Kalyani, Sir. Freight being borne by the supplier, hence liability for payment of ST on him ( on the supplier).

[CSSANJAY MALHOTRA]

Dear Mr. Sham,

Agree with both experts. Person (Consignor / Consignee) making the freight payment is liable to pay Service Tax under RCM, but this does not include Courier Companies (Blue Dart / DHL........) even if they transport material as they are registered as Cargo Management Services.

[KASTURI SETHI]

SH.CS SANJAY MALHOTRA JI,

Thanks for enrichment of knowledge, Sir.

AI Summary

Service tax on transportation: supplier-arranged freight makes the supplier liable; payer bears liability under reverse charge otherwise. Service tax liability for transportation depends on who arranges and pays freight: if the supplier arranges and pays the transporter, the supplier bears the service tax; if the consignor or consignee pays freight directly, the payer is liable to discharge service tax under the reverse charge mechanism. Classification of the transporter's service (for example cargo management services) can alter RCM applicability.