RCM TO PAY SERVICE TAX

[pravin bansal]

Dear Sir, I Am a Director of pvt ltd company and as per my balance sheet freight paid approx 2 LAKH but the bilty is allready paid by sender co. but freight charge to me in billing approx 10000 rs by company per bill what are the position in R C M in service tax to me

[KASTURI SETHI]

Dear Querist,

[Notification No. 9/2014-S.T., dated 11-7-2014] specifically provides that Service Tax will be payable by body corporate for the services provided by Director.Prior to this date , service tax for the services provided by Director to a Company was only payable by receiver of service.

Relevant extract of the above notification is appended below:

“(EE) in relation to service provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate, the recipient of such service;”;

Now under RCM Service Tax on freight is to be paid by the person who pays (bears) the freight. Preference-wise position is as under:-

1. Consignor (if prices are FOR)

2. Consignee

3. GTA

In view of the above legal position, you are not liable to pay Service Tax on freight.

[pravin bansal]

Dear sir

I am a frenchise of motor cycle company in local area and receipt by services of motor vehicle and commission of R's approx one -three lakhs in financial year in 2014-15 to 2016-17 what is the apply exemption under service tax limit 10 lakhs

[KASTURI SETHI]

You are not eligible for threshold exemption limit of ₹ 10 lakhs as you are using brand name of another person. Read notification no.33/12-ST as amended. See explanation given below notification.

AI Summary

Reverse charge on freight: payer bears service tax; franchisees using another's brand cannot claim small-provider exemption.
Reverse charge liability for service tax on freight rests with the person who bears the freight (consignor, then consignee, then GTA), and recipient liability applies to services provided by a director to his company under notification; a company director is therefore not personally liable where the company bears freight. The small-provider threshold exemption is inapplicable to persons using another's brand, so a franchisee operating under a principal's brand cannot claim the exemption.