SERVICE TAX ON TRANSPORTATION

[SURYAKANT MITHBAVKAR]

We cleared materials to customer place through transport. Transporter raised invoice in our name without charging Service Tax and payment made by us. Now we have to recover transport charges from customer after raising debit note to them since customer order says transport charges bear by them. In the above case who is liable to pay service tax whether ourselves (Consignor) or Customer (Consignee)

[Ramanujam Varadarajan]

In respect of payments made to transporter, as a consignor who is paying freight you are liable to pay service tax on reverse charge (if you fall under specified category of persons as per the provision).   Mere recover of transport charges from the customer without any markup, i feel, would not attract any service tax in your hands.

AI Summary

Reverse charge liability applies when consignor pays freight; recovery from consignee without markup does not create separate service tax. If the consignor pays freight to the transporter the consignor may incur a reverse charge liability where specified by law; recovering the same transport amount later from the consignee without any markup is generally treated as a reimbursement and does not create a separate service tax liability for the consignor.