service tax GTA

CA Sandeep Thakur (Managment Trainee) (188 Points)

17 August 2009

would like to discuss an issue regarding service tax (GTA) liability of my client (Trust)

Fact of the case:

i. The my client is purchasing goods from Hardik industries and Vardhman Industries hereinafter called Vendors located in Baddi(HP),which is a excise free Zone.

ii. The client is selling goods to ABC Ltd ,the sale is under the section 6(2) of CST act and exempted from Sales Tax liability.

iii. The goods are ordered from the vendors and directly sold to UIL , while the goods are in the transit.

iv. The freight amount involved in the above transaction is paid by client (Trust).

Issue : The GTA liability ie (Reverse Charge) is applicable to client ..?

Finding:

1) the GTA is not applicable when the consigner or consigner is not falling under any of the specified category ,i.e. the service tax liability remains with service provider ,transporter agency .In the specified category clause(f) covers the

“ any dealer of excisable goods, who is registered under the Central Excise Act 1944 or the rules made thereunder “

The vendors are providing the excisable invoice issued under Rule11 of CER 2002.

However the invoice does not having the Central excise registration No.

2) As the sale made under section 6(2) subsequent sale under the CST act1956, the freight is also covers the carriage outward part. However the ABC Ltd is company formed under companies act 1956, which is covered under the clause (b).

3) As in the above cases the reverse charge is applicable and Service tax liability is on the person paying the Freight amount i.e. the liability is on Trust.

Since the client is paying the Frieght amount ,hence the liability should lie on client .

Please look into the case and suggest whether the Service tax liability will lie on the client or not .