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mangesh chitnis (Querist)
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09 February 2015 We are a manufacturing unit registered in Central Excise.

I want to ask that whether service tax is to be paid on Carriage Inward (Raw-material & Capital Goods) or carriage outward?

And can we take credit of that service tax against Cenvat Payable?

RENGARAJ R.K

RENGARAJ R.K (Expert)
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09 February 2015 Dear Sir,

Under reverse charge mechanism, the service tax will have to be discharged by the person who pays freight amount if he falls under the following category.
a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;
c) any co-operative society established by or under any law;
d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under;
e) any body corporate established, by or under any law; or
f) any partnership firm whether registered or not under any law including association of persons;

so, both inward and outward freight is included.

Regarding Cenvat credit, inward is eligible but outward is eligible on certain condition.

Service tax is 12.36% and payable on 25% of the freight amount after availing 75% abatement.

No service tax is payable for the freight amount of rs.1500/- for single consignment and Rs.750/- for multiple consignment. For product wise exemption kindly refer the exemption notification.

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mangesh chitnis

mangesh chitnis (Querist)
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10 February 2015 Which are that certain conditions of taking credit of service tax on outward carriage?

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mangesh chitnis

mangesh chitnis (Querist)
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12 February 2015 Someone Pls reply to my above query at the earliest

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 In the context of Central Excise and Service Tax (before GST was introduced), here’s a detailed explanation regarding the applicability of Service Tax on carriage charges and the associated credit rules:

### **1. Service Tax on Carriage Inward and Outward**

#### **Carriage Inward**

- **Definition**: Carriage inward refers to the transportation of raw materials and capital goods from the supplier to the manufacturing unit.

- **Service Tax Applicability**:
- **Service Tax on Carriage Inward**: Under the earlier Service Tax regime, service tax was applicable on carriage inward (transportation of goods to the factory) if the service was provided by a Goods Transport Agency (GTA).
- **Credit of Service Tax**: Service tax paid on carriage inward for raw materials and capital goods was eligible for Cenvat credit, provided certain conditions were met.

#### **Carriage Outward**

- **Definition**: Carriage outward refers to the transportation of finished goods from the manufacturing unit to the customer.

- **Service Tax Applicability**:
- **Service Tax on Carriage Outward**: Service tax was not directly applicable to the carriage outward as it was generally not considered a taxable service under the Service Tax regime. However, if the service was provided by a GTA, service tax could be applicable.
- **Credit of Service Tax**: Credit on service tax paid on outward carriage was generally restricted. Under the Cenvat Credit Rules, credit of service tax on outward transportation was not permitted.

### **2. Cenvat Credit on Carriage Inward**

#### **Eligibility for Credit**

- **Conditions for Cenvat Credit**:
- **Input Services**: Service tax paid on carriage inward was eligible for Cenvat credit if the services were used for transportation of raw materials and capital goods.
- **Documentation**: Proper documentation, including invoices from the service provider and proof of payment, was required to avail the credit.
- **Related to Manufacturing**: The carriage inward must be related to the manufacturing process and the transportation of goods that are used in the production of finished goods.

### **3. Specific Conditions for Credit on Carriage Outward**

- **Rules**: Under the earlier Cenvat Credit Rules, credit on service tax paid on outward transportation was not permitted unless:
- The outward transportation was directly related to the delivery of goods to the customer.
- The service was used as an input service for the manufacture of the final product, as per the definition of input services under the Cenvat Credit Rules.

- **Circulars and Notifications**: Various circulars and notifications clarified the conditions and eligibility of credits, but generally, credit on outward carriage was not allowed unless explicitly stated otherwise.

### **4. Transition to GST**

With the introduction of GST, the previous Cenvat Credit Rules and Service Tax rules were replaced. Under GST:

- **Input Tax Credit (ITC)**:
- **Carriage Inward**: You can claim input tax credit for transportation of goods (inward supplies) if the transportation is used for the business.
- **Carriage Outward**: ITC on outward transportation (if it is a part of the supply of goods) is allowed under certain conditions.

- **Documentation**:
- **Invoices**: Ensure proper invoices are maintained for claiming ITC under GST.

### **Summary**

- **Carriage Inward**: Service tax was applicable, and credit could be availed against Cenvat payable, subject to compliance with conditions.
- **Carriage Outward**: Service tax was generally not applicable, and credit was restricted under the old rules.
- **GST Transition**: The transition to GST has modified the credit rules, with specific provisions for ITC on transportation services.

For the most accurate guidance, especially in complex cases, consider consulting with a tax advisor or legal expert who can provide detailed insights based on the latest GST provisions and any applicable transitional rules.