Dear Sir, X Ltd sold goods to Y LTD. Y Ltd paid Freight to GTA for Transportation of Goods Rs 10000. X Ltd ISSUED CREDIT NOTE TO Y LTD FOR RS 10000 FOR THE FREIGHT PAID BY Y LTD TO X LTD, BECAUSE AS PER THE TERMS X LTD WILL BEAR THE TRANSPORTATION EXPENSES . Query- Who WILL BE LIABLE TO PAY GST UNDER RCM @ 5% ON FREIGHT — X LTD OR Y LTD ?? PLS TELL THE PROVISIONS IN THIS REGARD ??
Query- 2 — Whether above issue of Credit Note should be ” WITH GST”” OR “WITHOUT GST” AS IT IS FOR THE PURPOSE OF REIMBURSEMENT OF TRANSPORTATION COST ??
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.
From the facts of the case it appears that the supplier X Ltd has privity of contract with GTA and accordingly GTA must be issuing invoice in favour of X Ltd. From above it emerges that X ltd being liable to pay freight is also liable pay tax under RCM.
In this case no credit note should be issued by X Ltd as there is no reduction in value of supply, rather the payment made to GTA directly be reduced while making payment to supplier against the invoice raised , which already includes the freight amount.
To demonstrate suppose if invoice raised for supply of goods value is Rs 1,00,000/- (incl transportation) plus GST Rs 18,000/- i.e. Rs 1,18,000/- and payment is made directly by recipient of Rs 10,000/-.Then in such a case net payment of Rs 1,08,000/- be made to supplier.
Credit note should not be issued as there is no reduction in value of supply.
Team Clearmytax.in