Liability of service tax - Proportionate amount

[Asked by Guest]

We are purchasing material from supplier named "A". For that material we have awarded work to transporter named "B". B does not have service tax registration number. In this case we liable to pay service tax ? . If we are liable to pay service tax than service tax shall be calculate on 100% amount of transportation or 25% (abatment) of transportation amount.

[Vijay Chitte]

As per your query, transorter having service tax registration or not,it is not relavant to you, Notification 35/2004-ST Dated 3rd December,2004 prescribed that the person making payment towards freight would be liable to pay servie tax, in case if you are fall under seven category of person. you may refer CBEC circular F.No. 341/18/2004-TRU(Pt.) Dated 17th December,2004.

Yes, As per Notification 35/2004-ST you have to get registered under service tax act and you are liable to pay service tax yourself if certain conditions as laid in said notification have fulfilled. Abatement shall be allowed only if tansporter has not taken cenvat credit in respect of inpur or capital goods.

[Madhukar N Hiregange]

The first question to be answered is whether B is a goods transport agent or a goods transport operator/ truck owner. If not GTA but a GTO in my view there is no liability on anybody. The FMs speech of 2004 maybe referred. Further a GTO may not issue a consignment note which may mean that he cannot be defined as a GTA. If he is a GTA then you are liable if you are not an individual or unregistered partnership firm. If you are liable then you should obtain a declration from B that he does not avail any cenvat credit on capital goods, inputs or input servcies and no deduction under not.12/2003 is availed by him. Once you obtain the declration the 25% payment optin is available to you. ON the amount paid to him there is credit available if you are paying excise duty or servcie tax as a taxable servcies provided.

AI Summary

Service tax liability on freight: payer may be required to account for tax and may claim abatement if transporter forgoes cenvat credit.
Liability to pay service tax on freight payments arises under Notification 35/2004 where the payer falls within specified categories and must register; abatement of 25% is available only if the transporter declares non availment of cenvat credit on inputs, capital goods or input services, and classification as Goods Transport Agent or Operator affects the liability and credit consequences.