REGARDING SERVICE TAX ON FREIGHT RELEATED TO EXPORT

[SANJEEV JADHAV]

Dear Sir, We are manufacturer and exporting our goods. We are paying service tax on inward as well as on ourward freight. My query is that while calculating service tax on GTA, can we deduct freight amount releated to export of goods. For example inward freight is 100000/- and Outward freight is 50000/- which includes Rs. 40000/- freight related to export of goods. Can we have to pay ST as per below: Inward freight = 10.3% on Rs. 100000/- = 10300.00 Outward freight = 10.3% on Rs. 10000/- = 1030.00 (50000 - 40000 = 10000) Is above calculation is correct ? Please also give clarification of Notf. No. 18 & 19/2009 dated 7.7.2009. For calculating service tax above is it necessary to submit declaration as mentioned in the above notifications.

[Snehal Kulkarni]

Central Government has issued notification No.29/2008-Service Tax, dated 26.06.2008 to exempt fully from levy of service tax on supply of transport vehicles (goods carriage) to a goods transport agency (GTA) to be used for transport of goods by road [section 65(105)(zzzzj) of the Finance Act, 1994].

Services provided by a GTA in relation to transportation of goods is leviable to service tax under GTA service [section 65(105)(zzp)]. Service tax for the GTA service provided is payable only on 25% of the amount charged for providing the GTA service and the balance amount is exempt from levy of service tax.

If your freight is Rs 10000, then the ST to be paid on Rs 2500 Only.

Being outward transportation is not your output service, you cann't deduct this freight. You have to pay the Service Tax on both Inward and Outward transportation.

You have Two Options

1.     Either Go For Refund on Service Tax Paid on the Export Service ( refer the Notification No 41/2007-ST, dated 6/10/2007)

2.     Or Avail the Exemption benefit under Notification No 18/2009-ST date 07-07-2009,

Only The conditions are for fulfill are

1.     You have to made an application with the Assistant / Dy Commissioner of Central Excise having Jurisdiction over the factory in the form EXP1

2.     Once the application accepted by the AC/DC, you may avail the exemption by quoting the relevant Approval Reference Nos on the Bill

3.     You have to file the half yearly return of these exempted services in Form EXP2 as specified in the said Notification.

[NANDKUMAR SAGWEKAR]

Dear Mr. Sanjeev Jadhav answers to your querry are as below :

1.While making payments of service tax on GTA , you can avail the abatement of   75 % of amount liable to pay and for balance you have to pay the service tax @ 10% , ed cess 2% on service tax and SHED Cess 1 % on service tax.

2. From practical point of view , you prepare three  GAR - 7 challans :

    a) Service Tax @ 10.30% on Inward freight Rs.100000 = Rs.2575 ( Including   ED & SHED Cess ) , here you can take Cenvat Credit

    b) Service Tax @ 10.30 on Freight paid on Export Rs.40000 = Rs.1030  Including   ED & SHED Cess ) , here you can file claim of refund refer noti, 17/2009 ST 08.07.2009 or else you may follow procedure as per Noti. No 18/2009 ST 08.07.2009 and need not required to pay service tax

   c ) Service Tax @ 10.30% on Freight outward Rs.10000 = Rs.258 /- here as whether to take cenvat credit please seek Consultant Advice but as per law and dept. assessee is not eligible to take the cenvat credit.

Preparation of three challans are not mandatory , but it become very easy to us for taking cenvat credit , filing of refund claim etc.

 

Thanks

ANAND M SHEMBEKAR

COST ACCOUNTANT

CELL 9421187122

 

 

 

[Snehal Kulkarni]

Dear Mr ANAND M SHEMBEKAR

It is no doubt that one can avail the Cenvat Credit of Service Tax Paid on the Inward Tranportation. But for Outward transportation, there are some limitation.

You cannt avail the Cenvat Credit on Outward Transportation beyond the scope specified in the circular No 97/8/2007 ST dated 23.08.2007

In case of Export Service ( GTA ) you can only go for Refund or Exemption as specified in Notification No 18/2009-ST

 

AI Summary

Service tax on GTA services: taxable portion subject to tax; inward freight creditable, export freight needs refund or exemption. GTA services attract service tax only on the taxable portion after abatement; service tax paid on inward freight is eligible for Cenvat credit. Export-related outward freight is not creditable beyond prescribed limits and must be addressed through refund or exemption procedures. To claim exemption an EXP1 application to the Assistant/Deputy Commissioner is required, approval reference must be quoted on bills, and exempted services must be reported in half-yearly EXP2 returns.