Service tax on transportation of goods

This functionality is specific for India.

Service tax on transportation is the tax levied on goods transported by road. When the consignor sends goods to the consignee through the Goods Transport Agency (GTA), GTA issues a consignment note and an invoice with details of the service tax payable. The person who pays the freight for the transported goods has to pay the service tax on transportation, if the consignor or consignee belongs to any one of the following categories:

  • A factory
  • Company
  • Corporation
  • Society
  • Co-operative society
  • Registered Dealer of excisable goods
  • Body Corporate
  • Registered Partnership Firm

If the consignor and consignee are Individual or Unregistered Partnership Firm and do not belong to any of the above categories, the Goods Transport Agency has to pay the service tax.

Exemption of service tax on transportation of goods

Service tax on transportation of goods is exempted in the following scenarios:

  • Transportation of fruits, vegetables, eggs or milk by road.
  • Freight charge is less than or equal to Rs. 750 per consignment per carriage; when multiple consignments from different consignors are transported together.
  • Freight charge is less than or equal to Rs. 1500 per carriage.
  • Taxable turnover of GTA is less than Rs. 8,00,000 per annum. The exemption can be availed by GTA only.
  • Service is provided in Jammu and Kashmir.

Service tax payable is levied only on 25 per cent of the freight cost. The consignor or consignee can avail this concession in the following cases:

  • CENVAT credit is not claimed for input or capital goods used for providing the taxable service.
  • The benefit of notification 12/2003 is not availed by the Goods Transport Agency.
CENVAT credit for service tax on transportation

You can claim CENVAT credit on service tax on transportation if it is an input service, and if

  • The invoice amount is paid to the service provider and
  • The service tax is paid to the concerned tax authorities.

The manufacturer or service provider can avail the CENVAT credit of input services based on the consignment note and the TR 6 challan which indicate the service tax amount paid. For more information on CENVAT credit, refer to CENVAT credit.

When a credit note is generated for an un-paid service invoice, the amount payable to GTA is reduced. The service tax amount payable to tax authorities also reduces proportionally. The amount payable to tax authorities is reduced proportionally, when a credit note is raised against a paid service invoice, and if the service tax is not paid to tax authorities. When the service tax is paid to tax authorities, the amount is added to the credit pool and used to pay excise duty or service tax payable.

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