We have agreement with vendor “A” for some Computer networking Material. Agreement says, we will pay to vendor Rate of Material as per agreement & will reimburse Transportation Expenses as per actual expense. Vendor raise a Debit note with all supporting of transportation cost & “ Charge Service Tax on Debit Note.”
We can not take credit for service tax or excise.
Vendor has confirm that they have availed abetment 75% . Please Suggest:-
1) Is vendor can raise such service invoice even if he is not providing such transportation services & if yes, under which Head of service Tax Act. 2) Can we ask vendor to submit such debit note without any service tax as reimbursement of expenses does not attract service tax. 3) Vendor deposit both amount of service tax, i.e. collected from us & U/S 68(2) of service tax for reverse charges & not take credit of any.
01 June 2012
Clearly as you are reimbursing the freight amount, no service tax is applicable. Its Vendor who is under the statutory obligation to discharge Service tax liability on freight amount paid by him. You analyse the agreement terms and if actual amount of freight also include resulting service tax liability, you are under the contractual obligation to pay the vendor service tax amount also.
By point no. 3 if u mean, vendor is discharging the service tax liability on freight amount paid by him and also deposting the service tax collected from you then it wrong...there is no need to charge service tax on the debit note raised to you as its just the reimbursement. If vendor is just collecting servie tax from you and not deposing then refer the expalnation given above.
CAclubindia
