Dear Sir, X Ltd sold goods to Y LTD. Total Freight charges were Rs 10000. Y Ltd should pay Freight of Rs 10000 to Transporter,when goods reach his premises. AS PER THE TERMS of Agreement between X & Y , SINCE X WILL BEAR FREIGHT CHARGES, SO, X WILL ISSUE FINANCIAL CREDIT NOTE TO Y FOR RS 10000.
As per the RCM notification the person who pays or is liable to pay freight for transportation of goods by GTA, shall be treated as person who receives the service for the purpose of payment of tax under RCM.
Now query- In above case, as Y Paid the Freight to Transporter, so, Y will be the person” who PAYS FREIGHT For Transportation”, as per the above provision. Similarly, as X will bear freight charges, & thus, he will reimburse freight charges & therefore , X is “liable to pay freight for Transportation”, as per the above provision.
SO, who actually should pay GST as per the above provisions ?? Pls clarify the issue
We have answered earlier also on this issue. RCM will be paid be paid by person who is having privity of contract with the GTA and is liable to pay freight to the GTA as per contract with GTA and in whose name invoice / note is issued by GTA.
In case privity of contract is between X Ltd and GTA but freight is paid by Y Ltd, then also RCM is to be paid by X Ltd. Further as freight in this case would form part of value, GST thereon will be separately charged by X Ltd from Y ltd and against which ITC of tax pid under RCM on GTA can be availed.
Team Clearmytax.in