Gta
This query is : Resolved
24 January 2012
if there is reimburesment of freight expense then who will bear liability of service tax payment under GTA...
For Example : X ltd buys from Y ltd and freight is paid by Y ltd which is reimbursed from X ltd then who is liable to pay service tax...?
For Example : X ltd buys from Y ltd and freight is paid by Y ltd which is reimbursed from X ltd then who is liable to pay service tax...?
26 January 2012
when frieght is paid by Y, Y is liable to pay service tax.
Y can reimburse the freight from X including service tax,
Y can reimburse the freight from X including service tax,
26 January 2012
if y reimburses freight including service tax then who can take credit of the same...?
provided that service tax is not mentioned on bill ...
provided that service tax is not mentioned on bill ...
27 July 2024
When it comes to the reimbursement of freight expenses in the context of Goods Transport Agency (GTA) services, determining the liability for service tax and who can claim credit can be nuanced. Let’s break down the scenario based on GST provisions, as Service Tax has been replaced by GST in India since July 1, 2017. However, I’ll cover both GST and the Service Tax context for completeness.
### **Scenario:**
- **X Ltd** buys goods from **Y Ltd**.
- The freight expense is incurred by **Y Ltd** and later reimbursed by **X Ltd**.
- The service tax/GST is either included or not mentioned on the freight bill.
### **1. **GST Context (Post-July 1, 2017)**
#### **A. **Liability of GST Payment**
1. **Reimbursement of Freight**:
- **Freight Paid by Y Ltd**: If **Y Ltd** pays the freight and includes it in the invoice to **X Ltd** (with or without GST), **Y Ltd** will generally be responsible for charging GST on the freight if it is treated as a separate service and is not covered under reverse charge.
- **Reimbursement**: When **X Ltd** reimburses the freight expense, the reimbursement amount typically does not attract additional GST if the original invoice already included GST.
2. **Who Pays GST**:
- **Y Ltd** is responsible for charging and paying GST on the freight service if it is covered under the forward charge mechanism.
- **X Ltd** is responsible for paying GST if the service is under reverse charge and **X Ltd** is the recipient.
3. **Credit of GST**:
- **X Ltd** can claim Input Tax Credit (ITC) on the GST paid on freight services if the invoice includes GST and **X Ltd** uses the services for business purposes.
- **Y Ltd** needs to ensure proper documentation and GST inclusion on the invoice to allow **X Ltd** to claim ITC.
#### **B. **Service Tax Context (Before July 1, 2017)**
1. **Reimbursement of Freight**:
- **Freight Paid by Y Ltd**: **Y Ltd** would charge service tax on the freight if it was directly billing the freight and it was part of the taxable service.
- **Reimbursement**: If **X Ltd** reimburses the freight expense, the reimbursement itself does not attract service tax if the original freight service already included it.
2. **Who Pays Service Tax**:
- **Y Ltd**: If **Y Ltd** is providing the service and charging service tax, then **Y Ltd** is liable to pay the service tax to the government.
- **X Ltd**: If **Y Ltd** is under reverse charge, then **X Ltd** would need to pay the service tax under reverse charge.
3. **Credit of Service Tax**:
- **X Ltd**: Can claim credit of service tax paid on freight if it is mentioned on the invoice and used for business purposes.
- **Y Ltd**: Must ensure that service tax is correctly accounted for and mentioned in the invoices.
### **2. **Key Points**
- **Documentation**: Proper invoicing and documentation are crucial. The invoice should clearly mention whether GST/service tax is applicable and its amount.
- **ITC Claims**: To claim ITC, the tax should be clearly mentioned on the invoice, and the services should be used for business purposes.
- **Reimbursement Handling**: Reimbursement of freight should be handled based on the terms of the original service agreement and the inclusion or exclusion of tax in the original billing.
### **Summary**
- **GST Context**: **Y Ltd** is responsible for charging GST if applicable, and **X Ltd** can claim ITC on the GST paid if the invoice includes GST and the services are used for business.
- **Service Tax Context**: **Y Ltd** should have charged and paid service tax. **X Ltd** can claim credit if the tax is included in the invoice and used for business.
For specific cases or complex scenarios, consulting with a GST or tax professional is recommended to ensure compliance and accurate tax treatment.
### **Scenario:**
- **X Ltd** buys goods from **Y Ltd**.
- The freight expense is incurred by **Y Ltd** and later reimbursed by **X Ltd**.
- The service tax/GST is either included or not mentioned on the freight bill.
### **1. **GST Context (Post-July 1, 2017)**
#### **A. **Liability of GST Payment**
1. **Reimbursement of Freight**:
- **Freight Paid by Y Ltd**: If **Y Ltd** pays the freight and includes it in the invoice to **X Ltd** (with or without GST), **Y Ltd** will generally be responsible for charging GST on the freight if it is treated as a separate service and is not covered under reverse charge.
- **Reimbursement**: When **X Ltd** reimburses the freight expense, the reimbursement amount typically does not attract additional GST if the original invoice already included GST.
2. **Who Pays GST**:
- **Y Ltd** is responsible for charging and paying GST on the freight service if it is covered under the forward charge mechanism.
- **X Ltd** is responsible for paying GST if the service is under reverse charge and **X Ltd** is the recipient.
3. **Credit of GST**:
- **X Ltd** can claim Input Tax Credit (ITC) on the GST paid on freight services if the invoice includes GST and **X Ltd** uses the services for business purposes.
- **Y Ltd** needs to ensure proper documentation and GST inclusion on the invoice to allow **X Ltd** to claim ITC.
#### **B. **Service Tax Context (Before July 1, 2017)**
1. **Reimbursement of Freight**:
- **Freight Paid by Y Ltd**: **Y Ltd** would charge service tax on the freight if it was directly billing the freight and it was part of the taxable service.
- **Reimbursement**: If **X Ltd** reimburses the freight expense, the reimbursement itself does not attract service tax if the original freight service already included it.
2. **Who Pays Service Tax**:
- **Y Ltd**: If **Y Ltd** is providing the service and charging service tax, then **Y Ltd** is liable to pay the service tax to the government.
- **X Ltd**: If **Y Ltd** is under reverse charge, then **X Ltd** would need to pay the service tax under reverse charge.
3. **Credit of Service Tax**:
- **X Ltd**: Can claim credit of service tax paid on freight if it is mentioned on the invoice and used for business purposes.
- **Y Ltd**: Must ensure that service tax is correctly accounted for and mentioned in the invoices.
### **2. **Key Points**
- **Documentation**: Proper invoicing and documentation are crucial. The invoice should clearly mention whether GST/service tax is applicable and its amount.
- **ITC Claims**: To claim ITC, the tax should be clearly mentioned on the invoice, and the services should be used for business purposes.
- **Reimbursement Handling**: Reimbursement of freight should be handled based on the terms of the original service agreement and the inclusion or exclusion of tax in the original billing.
### **Summary**
- **GST Context**: **Y Ltd** is responsible for charging GST if applicable, and **X Ltd** can claim ITC on the GST paid if the invoice includes GST and the services are used for business.
- **Service Tax Context**: **Y Ltd** should have charged and paid service tax. **X Ltd** can claim credit if the tax is included in the invoice and used for business.
For specific cases or complex scenarios, consulting with a GST or tax professional is recommended to ensure compliance and accurate tax treatment.
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