freight charges paid to supplier

[Asked by Guest]

Dear expert

I was received one invoice( duplicate for transport).  detail as follows.

Assessable value -  40000/-

Excise duty    12.36-    4944/-

Total                       -   44944/-

Freight                    -     2500/-

G. Total                  -   47444/-

I was paid full amount to supplier Rs. 47444/- can i lible to service tax on Rs. 2500/- on Freight .

Please guide.

Regards

Manoj Raut       

[JAMES PG]

 Is there any clause in the Purchase Order regarding taxes and duties especially on Service Tax on freight ? In the LR issued by the transporter, who has been nominated as the person liable to pay ST ?

[YAGAY and SUN]

It seems that you have reimbursed the freight charges to your supplier but not directly paid to Transporter.  Hence, no need to pay the services tax.

[JAMES PG]

As per the provisions of Rule 2(d)B, any person who is liable to pay freight either by himself or through his agent is liable to pay ST on freight. In the particular case, if supplier may be paying freight to the transporter as an agent of the buyer, as per the terms of Purchase Order, then liability to pay ST falls on buyer.Supplier can escape laibility based on the PO terms and LR which might have specified consignee as the person liable to pay ST

[NEERAJ KUMAR, RANCHI]

I am in agreement with Mr Khatri, if you have not paid freight charges directly to the transporter and transporter has not issued invoice in your name you are not required to service tax

[JAMES PG]

The wording as per Rule 2(d) B of Service Tax Rules is “the person who pays freight or liable to pay freight either by himself or through his agent”

 Dictionary meaning of “liable”is “liable to perform an act for which he/she/it contracted to do”

As per Rule 4B of ST Rules, GTA has to issue Consignment Note and should contain details of Person liable to pay ST as Consignor, Consignee or GTA. If freight is charged in the Invoice and Consignment Note  mentions Person liable to pay ST as the Consignee and contractual terms in the PO states that ST to be paid by the Consignee, supplier of the goods can definitely escape liability and it will be cast upon the Consignee. Consignee is legally bound as as he is liable to perform and act for which he is contracted to as per the Purchase Order or terms of sale.

In the case of MSPL Ltd Vs CCE, Belgaum  (2009 (5) TMI 376 - CESTAT, BANGALORE) = (2009-TIOL-1678-CESTAT-BANG), it was held that Consignee is liable to pay ST since the freight is reimbursed by him

AI Summary

Freight service tax liability depends on who is contractually liable to pay freight; documentation and PO terms determine responsibility.
Liability for service tax on freight is governed by who pays or is contractually liable to pay freight, including when payment is made through an agent. The Goods Transport Agency consignment note and purchase order terms identifying the person liable (consignor, consignee or GTA) determine which party bears service tax; if the consignee is designated or freight is paid by the consignee as principal, the consignee becomes liable and the supplier can escape liability.