09 February 2016
If a transport contact does not specify rate of unloading, loading or handling charges separately in a transport contract but included,Please inform whether it will attract service tax Case One: Unloading/ loading from rake point and unloading/loading at Warehouse. Case Two: Warehouse to warehouse shifting
Also if separate rates for unloading/loading or handling is mentioned in the contract, What will be effect of service tax The ratio of cost of Transportation and handling(Loading-Unlaoding) 50:50
13 February 2016
If I understand your query properly - a transport agency has entered into a composite contract to transport goods from the railway siding / rake to the warehouse. If that be the case, it is a contract of goods transport and the activity of unloading from the rake to the truck and unloading from the truck at the warehouse would be incidental to the transportation of goods and would be covered under Goods Transport Agency Service. Since GTA services are subject to Reverse Charge Mechanism, there will be no liability to service tax on the transporter.
It is most important to note that the agreement is the main document and how it is drafted is important. The transport agreement must be a composite one. The agreement or work order should not show separate components of the activity e.g. unloading from the railway wagon / loading the truck / transporting to the warehouse / unloading the truck at the warehouse. Normal trade practice for goods transportation by road implies the above activities and hence there is no necessity for such detailed description. Further a composite rate will be quoted for the contract e.g Rs. 50,000/- (all inclusive) or Rs.100/- PMT / KM.
The same would also hold true fro transportation from Warehouse to Warehouse.
Even if the contract details the activities, since a composite rate has been quoted the contract would be one of Goods Transport by Road (the activity of loading / unloading being incidental to the transportation service) and on the transporter providing a consignment note, the liability for payment of Service Tax shifts to the service recipient i.e. the person whose goods are being transported.
However, if the contract breaks up the activity into detailed activities as above and specifies separate rates for the activities e.g Loading Unloading Rs.15/- PMT - Transportation Rs.75/- PMT / KM or Loading Unloading Rs.7,500/- Transportation Rs.40,000/- then the contractor is rendering two separate services Goods Transportation Services in which no Service Tax will be charges, since the recipient is liable to pay the service tax under Reverse Charge Mechanism and Cargo Handling Services for the loading / unloading part on which the contractor has to collect service tax and remit the same to the credit of the Government. This type of agreements are very clearly classified by various decisions of the CESTAT and certain High Courts. I just refer to the case of Gangadhar Bulk Movers Private Limited vs. Commissioner of Central Excise, Nagpur [(2012) 27 S.T.R. 258 (CESTAT - Mumbai)] wherein the Western Coalfields Limited had in the contract with Gangadhar Bulk Movers Private Limited specified the activities and rates separately. The Honorable CESTAT held that the agreement was not an agreement for transport of goods by road but comprised of two separate distinct activities since the contract clearly states the two activities separately and also offers separate rates for each activity. Hence "Service provided should be integrally or inseparably connected with handling of cargo or attributable thereto without being a mere activity of transportation of such cargo since transport service independent of cargo handling is an exception under the scheme of levy by Section 65(23) of the Finance Act 1994 (as amended). Cargo is not only goods transported by a vessel or by aircraft but also goods transported by motor vehicle and, the tipper is motor vehicle."
Therefore where the agreement states loading / unloading and transportation for a composite rate, the contract can be termed a contract for Transportation of Goods by Road, whereas in case of a contract as referred to in Paragraph 2, two separate services are rendered and the contractor is liable for payment of service tax on Cargo Handling Service portion,
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