Credit of service tax on freight - Registration

[Guest]

Dear Sir, We are a company (XYZ). One of our venders (ABC) has supply goods and as per terms ABC will pay the cost of transportation and later claim reimbursement from XYX. ABC raises a invoice in the following manner: Value of goods: Rs. 10,00,000 Add: Freight (Reimb) Rs. 50,000 Add: S. Tax on freight Rs. 1,275 TOTAL Rs. 10,51,275 I want to know can we claim the credit of above said service tax on freight. Pls note that the service tax registration of ABC is clearly printed on the invoice raised by him. Kindly check and clarify. Thanks & regards, Anshul.

[Surender Gupta]

Since ABC charges the Service Tax on its bill,payes to the department, it is eligible to avail Cenvat Credit if the condistions of Rule 2(l) of Cenvat Credit Rules, 2004 are satisfied. In your case as apparent on the query, ABC is eligible to availe the Cenvat Credit.

[Guest]

Freight serivce tax paid by XYZ can be claimed or not depends on the following circumstances: If the purchase of good is related for the serives for which you have to pay serive tax then the service tax paid can be claimed as input tax. But if u paying serive tax for another serives and input tax was paid for any other serive then it cant be claimed.

AI Summary

Cenvat credit on freight service tax is claimable where Cenvat Credit Rules conditions and nexus to taxable output exist. Cenvat credit on service tax charged and paid by a vendor for reimbursed freight is available to the purchaser if the vendor has charged and paid the tax and the purchaser satisfies the documentation and eligibility conditions under the Cenvat Credit Rules, 2004 (including Rule 2(l)). Claiming credit also requires a nexus between the freight service and the purchaser's taxable output; freight related to taxable activities may be claimed, whereas freight connected to non creditable or exempt activities cannot be claimed.