Reverse charge

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 April 2012 What is reverse charge under service tax with reference to freight.I am paying freight of RS1000/ To Rs 5000/ per trip for 30 kms distance transportation. Freight is paid by me.We pay freight after lorry owners sign our vouchers.are we liable to pay service tax.Please reply urgently.I am paying freight charges under proprietorship firm and goods are purchased for trading.I am paying freight Inward & Outward. Am i Liable to pay service Tax.

Dilip Darji

Dilip Darji (Expert)
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12 April 2012 Dear Sir.
If Transportrer is not issuing any consignment note, you need not to pay any service tax. Service provided or to be provided by any person (including a commercial concern) on or after 01/05/2006 is liable to Service Tax. If the Transporter is a commercial concerned you are required to pay Service Tax. If the transporter is an individual and does not issue consignment note,you need not to pay service tax.

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CA Kishore Tallam

CA Kishore Tallam (Expert)
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12 April 2012 If the service receiver is an individual, then he/she is not subjected to reverse charge mechanism.

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CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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13 April 2012 SInce you are individual you are not liable to pay service tax even if your are paying frieght. It is a liability of transporter.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 April 2012 After 19.04.2006, Import of Rules has been inserted by Government. Read Rule 2(1)(d)(iv) itroduced w.e.f. 19.04.2006 with Section 66A of Finance Act, 1994 (i.e. Charge of Import of Services) itself saying the levy of Service Tax is on Service Provider and not on Service Receiver. Normally in Local Service, Service Tax is charged to Service Receiver but in case of Import of Service the same is leviable to Service Provider. So its called Reverse Charge Mechanisum.
Why? Imagine a situation where, for the purpose of collection Government have to go and find Service Receiver located outside India if Service Tax in case of Import is levied on him. It a tuff and uneconomical way of charging mechanisum? For an easy way of Recovery and collection, the same is charged to Person providing Service. Even Registration is also required to be taken by Service Provider.
This is the unresolved area of Import of Service is from when such Services will be taxable whether post or pre-introduction of Insertion of Section 66A. There are different views of tribunals of different states.