Service Tax on Frieght and transportation charges and TDS applicability
frieght charges and transportation charges, vehicle hire, these are services.
How to calculate service tax?
Need explanation with tax act & how to deduct TDS?
Lets break the Service Providers in different groups as per your doubt.
- Owners of the trucks or transport vehicles who rent their vehicles to Goods transportation Agency (GTA) - Not taxable
- The agent who provides transport services (GTA). - Taxable
For first category, Owners of truck owners the services are not taxable. For example: Suppose Mr. A have rented his trucks to a MR. B and Mr. B is an agent who provides Goods transport services. In this case Suppose Mr. B receives Rs. 100,000 and pays 35000 to Mr. A for hiring the trucks.
Mr. A don't have to pay service tax on Rs. 35000 which he received as hiring charges.
This was confirmed by Finance minister P.Chidambaram in his budget speech on 8/7/2004 (Read para 149 of speech).
Service provided by truck owners is completely exempted whether they rent or transport the goods on their own.
The second category Goods Transport Agency is taxable. Any service provided by GTA are taxable, however few services like transportation of agriculture products, eggs etc. is exempted.
The service is taxable under the head, Goods Transport Agency. Please note that only services provided by agent is taxable and not by truck owners.
What is GTA?
GTA means any person who takes the contract to transport the goods from one location to another (this is not legal definition but simplified) and is not the truck operator.
Calculation of Service Tax
As per entry no. 7 of notification 26/2013-ST dated 20-06-2012 the service tax is payable for service provided by Goods transport Agency on 25% of the gross amount charged.
Example: Suppose the value of service charges to client is 100Rs., only on 25Rs. Service tax has to be paid.
Who have to pay Service tax in case of GTA Services?
As per clause (2) of notification No. 30/2012-ST dated 20-6-2012, service tax is payable by recipient of Services provided by Good Transport Agency for the transportation of goods by road where the consignee or consignor is any of the person listed.
Coming to your doubt, if all the services are provided by the truck owner than service tax is not applicable However the vehicle should be a transport vehicle and not passenger vehicle. If the services are provided by GTA, than Service Tax provisions are attracted as explained above.
TDS on amount paid to Transporters
If the recipient is a transport contractor and frunishes PAN to the deductor, tax is not deductible under section 194C.
Thus no TDS is deductible in case transporter have the PAN and mentions it on bill provided to deductor.