Service tax on transport(payable) & Service tax input

[Rudrayani Shedjale]

Hello

We are into Work Contract Service.

i want to confirm some rates.

1. into work contact service we avail, 60% abatement & taxable portion is 40%.so previously the rate of service tax for works contract was 4.94% which is now changed to 6% (40% of 15 i.e. prevailing service tax rate)

2. i want to know what is the taxable portion of transport service that we receive? 25% or 30% ?? if a supplier charges freight charges in his invoice (material purchase) are we liable to pay service tax on the same?

3. While taking service tax credit, we are eligible to take entire portion of service tax or is there any limit to 40%

please help.

thank you.

[Rajagopalan Ranganathan]

Madam,

In respect of GTA service you have to pay service tax on 30% of the gross value charged by the provider if GTA. If the supplier charged the freight in the invoice then he is liable to pay the service tax as consignor and not you. In such case you are eligible to avail the credit. If you pay the freight as consignee then you can pay the service tax and can avail the full credit. In respect of GTA there is no restriction in availing the credit.

[Rudrayani Shedjale]

Sir, Thanks a lot for the information.

But please give more clarification.

if supplier has mentioned freight in his invoice, he will pay the service tax on it.We need not to pay any tax.

if supplier has given us seperate invoice towards transport (no service tax mentioned), shall we pay service tax on it?

As i have mentioned we are into Works Contract Service, we take abatement 60% & 40% we pay service tax.(towards works contract service we provide). So while taking input of service tax credit (on testing charges) are we eligible ti take entire portion of service tax or is it restricted to 40% only?

[Ganeshan Kalyani]

The freight amount charged by the supplier may be for two reason. one is the supplier has just arranged the transport and paid the freight as per your instruction . Thus in such case you are supposed to pay service tax on the freight and service tax to be paid on the same. The credit of tax paid is available to you based on the challan.

Secondly , the supplier has paid the freight after arranging for the transport in such case he should pay the service tax on the same. The credit on service is eligible to him upon payment of the tax.

The works contract service has abatement of 60% is case of original works and 30% in case of works other than original works . The credit is eligible for full tax paid and not 40% or 60% as you understand .

The testing charges as mentioned by you does not fall under reverse charge. Hence the service provider shall charge full service tax on the invoice and accordingly pay to the government . Further based on the invoice the service receiver shall be able to claim the credit.

[Rudrayani Shedjale]

Ganeshan Kalyani Sir, thank you very much for the information. One more question please, if we have received invoice towards transport on which no service tax registration no.is mentioned, we should pay service tax on it & take credit of the same?

[Ganeshan Kalyani]

Do you mean to say that your supplier has raised an invoice with the transporter invoice attached to it and there is no Service tax registration number on the invoice. If this correct then you are to deposit service tax on freight amount and subsequently credit can be taken based on the tax paid challan.

[Rudrayani Shedjale]

yes exactly. supplier has given one invoice towards material purchase (by charging vat & he is having tin number also) along with a transport invoice on which no service tax registration number is mentioned.

So we should pay service tax on transport (30% taxable) & take credit of the same?

[Ganeshan Kalyani]

Yes, you can pay the tax and claim the credit. Further the consignment note should be in the purchaser name.

[Rudrayani Shedjale]

Ok. Thanks a lot sir for this valuable information.

AI Summary

Service tax on transport: portion of freight is taxable; payer who pays the tax may claim input credit. Works contract abatement reduces the taxable portion of the contract but does not limit input tax credit to that abated percentage; transport services attract service tax on a portion of freight charged by the transporter. If the supplier invoices freight and pays service tax, the supplier is liable and the recipient may claim credit; if the purchaser/consignee pays freight or must deposit tax because supplier registration is not shown, the purchaser may pay the service tax and claim full credit based on the challan and a consignment note in purchaser's name.