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Service tax on gta

aishwarya s raghavan (student) (224 Points)

28 March 2013

Dear All!

Please clarify whether in the following instance, B Ltd is liable for service tax under reverse charge Mechanism.

A Ltd. has placed an order with B Ltd for the supply of Equipments. B Ltd, in turn, procures the material from C Ltd, instructing to deliver the ordered equipment directly at the site of A Ltd. C Ltd, transports the material through GTA and claims the transportation charges from B Ltd. In this case, B Ltd liable for payment of 25% of service tax on the GTA bill?

Thanks in advance!

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Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 29 March 2013

Dear Aishwarya,

As per notification no. 30/2012 (reverse charge), 100% (without abatement) of Service Tax @ 12.36%on Freight paid is the liability of the person who pays or is liable to pay freight, if the person liable to pay freight is, inter alia, a body corporate.

In the above case, C Ltd. is the consignor and A Ltd. is the consignee. So, as far as the service of transportation of goods is concerned, B Ltd. is not in the picture and GTA is not in any way concerned with the B Ltd. Now, if the consignment note says that the Freight is 'To Pay' basis, then A Ltd. is liable to pay service tax @ 12.36%, otherwise C Ltd. shall be so liable.

Note: The ratio of 25% and 75% is applicable if the tax is payable by GTA itself, who is eligible for availing abatement of 75%.

Regards,

Manoj Agarwal (tax2001-it @ yahoo.com)