20 October 2010
We manufacture pigments (color dyes). Last year we have paid central excise duty (on goods produced and cleared) less than 10 lac (by cash + Cenvat credit both)
We do not provide any type of service at all. We receive transport service from different transporter/s, transport agencies (for raw material receipt and dispatch to customer and upto depot)
Kindly guide me about : are we liable to pay service tax as transport service receiver If we are paying the related transport bills.
Some body told me that yes we have to pay service tax as service receiver (though we do not provide service of any type at all.
Some body told not necessary.
Till date we are not registered for service tax But we are registered for central excise from last two years and have started e filing of central excise ER-1 from last two months.
Kindly guide me service tax is liable on us (related to transport service and extra if any) or not
21 October 2010
Since you are a manufacturer , you are required to pay the ST on 25% of the freight paid to GTA [ other than to GTO- owners/ operators} from 1.1.2005. You would alsobe eligible for credit of the same in paymentof CED. Outward freight thereis some dispute as present.
02 August 2024
In the context of your business as a manufacturer of pigments and the use of transport services, here’s a detailed guide on your liabilities concerning Service Tax:
### **1. Service Tax Liability on Transport Services**
**a. Reverse Charge Mechanism:**
- **Transport Services:** As per the Service Tax provisions, if you are receiving transport services, particularly for the transportation of goods, the liability to pay service tax may fall under the reverse charge mechanism (RCM). Under this mechanism, the recipient of the service (in your case, your company) is liable to pay service tax instead of the service provider.
- **Applicability of RCM:** - For transport services provided by a Goods Transport Agency (GTA), the reverse charge mechanism typically applies. This means that if you receive transport services from a GTA, you are liable to pay service tax on these services. - The rate of service tax under RCM for transport services can be 50% of the total service tax liability if the GTA provides services under reverse charge.
**b. Threshold Limit and Registration:**
- **Threshold Limit:** For Service Tax, a threshold limit was previously set for exemption (e.g., Rs. 10 lakhs for small service providers). Since you mentioned your excise duty payments are less than Rs. 10 lakhs, this threshold generally pertains to service providers. However, as a service recipient under RCM, the exemption limit does not apply to you directly.
- **Registration Requirement:** - **Mandatory Registration:** If you are liable to pay service tax under the reverse charge mechanism, you are required to obtain Service Tax registration even if you do not provide any services yourself. - **Filing Returns:** Once registered, you will need to file service tax returns (ST-3) and pay the service tax on the transport services received.
### **2. Practical Steps to Follow**
**a. Obtain Service Tax Registration:**
- **Registration:** If you are liable under RCM, you should apply for Service Tax registration with the relevant authorities. This is mandatory to comply with the service tax regulations.
**b. Pay Service Tax:**
- **Reverse Charge:** Calculate the service tax payable under the reverse charge mechanism for the transport services you receive and pay it accordingly. This amount should be reported in your Service Tax returns.
**c. Maintain Records:**
- **Documentation:** Keep detailed records of the transport services received, including invoices and payment details. This documentation is crucial for both compliance and for claiming any eligible Cenvat credit.
**d. Compliance with Excise and Service Tax:**
- **Integrated Compliance:** Ensure that you integrate compliance with both Central Excise and Service Tax regulations. This includes proper documentation, registration, and filing of returns.
### **Summary**
- **Liability:** Yes, you are liable to pay service tax on transport services received under the reverse charge mechanism, even if you do not provide any services. - **Registration:** Service Tax registration is mandatory if you are liable to pay tax under the reverse charge mechanism. - **Action Required:** Obtain Service Tax registration, pay service tax on transport services, and file returns accordingly.
**Additional Note:** The Goods and Services Tax (GST) has replaced Service Tax for most services from July 1, 2017. If you are under the GST regime, similar provisions would apply under GST for reverse charge on transport services. Check the latest GST regulations if applicable to your situation.
Consulting with a tax professional or a GST consultant is advisable to ensure accurate compliance and to handle specific queries related to your business.
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