Service tax on transportation

This query is : Resolved

narendra (Querist)
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02 February 2011 Dear Friends
Greetings!

Please help in this...

A private co. (Say X) engaged in trading of commodities for which it purchase it locally and then sale it to some other ltd. co. in the same state by engaging the individual truck owners to carry the materials.
This company ( X) pays to the individual truck owners.( Say Rs. 20,000/- each and in total 15,00,000 to different owners)
Now while billing to the buyer (Say-Y) it shows seperately transportation in the bills with amount of 15,50,000/-( an excess of 50,000/-)and also pays VAT ( Karnataka) on the transportation amount alos along with the price of the materials.
Now the buyer (Y)says that he himself will pays the service tax on the transportation part and we ( co. X) need not to pay the same.
My Query is whether it can be done? I have impression that since we are paying to the transportors we had to pay the service tax on that.
please guide.

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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02 February 2011 if you are hiring trucks from truck owners, there is no service tax. However, if you hiring the same with some truck agencies then there is a service liability which you are liable to pay.