SERVICE TAX ON FREIGHT COLLECTED FROM CUSTOMER

[piyush agarwal]

I am a manufacturing unit. I have issued a excise invoice and charge freight seperately on the invoice. i have collected 12 lac as freight from customer and paid to GTA ₹ 10 lac. ₹ 2 lac is my income. Neither i have charged any excise duty nor service tax on ₹ 12 lac. Now my question is whether i am liable to pay service tax and if required then at what about and under what circumstances.

[piyush agarwal]

I have paid service tax on 10 lac paid to GTA under RCM. Now again i am liable to pay any service tax?

[Himansu Sekhar]

The amount paid to GTA agency is liable for tax. Such amount should be the taxable value.

[Himansu Sekhar]

Any profit on account of transport income will not be added to the assessable value as held in Baroda electric meters ltd vs cce 1997 (94) ELT 13 =1997 (7) TMI 126 - SUPREME COURT OF INDIA

[Rama Krishana]

I concur with the views of Mr. Himanshu

This amount may not be liable to central excise nor would be chargeable to service tax

[Rama Krishana]

But, obviously you may be liable to service tax on GTA as a whole i.e 10 lacs if the conditions are satisfied. But not on rs. 2 lacs separately.

[piyush agarwal]

In my view I am only liable to pay service tax on 10lac which I have already paid. Further I am not suppose to pay neither excise nor service tax on any amount of freight collected from customer as service by transportation of goods other than GTA and courier agency is exempt under negative list. Since service is covered under negative list hence I am not suppose to pay any tax on amount of freight collected

[Himansu Sekhar]

• Thank you Ramakrishnaji

[KASTURI SETHI]

In this case 100 % liability is upon service receiver. GTA service has been provided. There is service provider, service receiver and consideration. As per ST law, Service Tax on ₹ 12 lakhs is required to be deposited with Govt. If not paid, SCN demanding ST along with interest and penalty will be issued. Freight amount is ₹ 12 lakhs and not ₹ 10 lakhs. Service receiver has paid freight to the querist/consignor. Status of freight cannot be changed by any stretch of imagination. Who has paid the freight ? This question will decide the fate of SCN to whom is to be addressed.

[KASTURI SETHI]

Sh.Pyuish Aggarwal Ji,. In case ST is not paid on balance amount of freight and SCN is not issued within prescribed time limit, let me know on this forum. I shall be happy to gain knowledge from you.

[MUKUND THAKKAR]

I am agree with respected Sir Kasturi Sethiji,

₹ 2 lacs. coming under the additional consideration. Dept will consider this amount as part of value.

[piyush agarwal]

i agree with the views of Himansu Sir. 2 lac is profit element in transportation and same cannot be charged to service tax.

[KASTURI SETHI]

There is a lot of difference between Central Excise Valuation method and Service Tax valuation method. It is with reference to the Judgement of Supreme Court quoted By.Sh.Himansu Sha Ji.

[KASTURI SETHI]

Sh.Piyush Agarwal Ji,

Sh.Himansu Sha agrees with you. You cannot say "I agree with Sh.Himansu Sha " You are querist. Querist is neutral. Querist is seeking remedy. Naturally querist will tilt towards the beneficial side. Ball is not in the court of experts or querist.At present, ball is in the court of Service Tax Department, Govt. of India. Let us see which way the winds blow. We are expressing our independent opinions and these opinions have no impact on Govt. These opinions after weighing pros and cons help the querists and other readers in taking the decision.

[piyush agarwal]

Yes Sethi Sir i agree. Let see what department think.Thanks.

[JAIPRAKASH RUIA]

Non chargeability of Excise duty for difference amount of freight seems very much clear in SC decision but service tax under RCM is still to be look into. Both should be look into with separate view.

[KASTURI SETHI]

Regarding CE duty on freight, place of removal will come into picture. Here issue is of payment of ST on the element of freight. The party does not want to pay ST on the freight of ₹ 2 lakhs treating it as profit. It cannot be treated as profit from ST angle. He may treat it as profit in his books of accounts but ST has to be paid. No escape route as per ST law.

AI Summary

Service tax on freight: payer may be liable under reverse charge on the full freight collected, not only carrier payment.
The querist paid a carrier under the reverse charge mechanism and retained profit on freight charged to customers; commentators dispute whether tax applies only to the amount paid to the carrier or to the entire freight collected, noting that central excise precedents exclude profit for excise valuation but service tax valuation may treat the full freight or additional consideration as part of the taxable value and expose the service recipient to liability and recovery action.