Service tax exemption on ocean frieght

This query is : Resolved

Bandhu Patil (Querist)
Follow

29 August 2011 CHA not levied service tax in his bill on ocean freight for Import material.
Required advise or notification/circular for exemption of service tax on ocean freight for high seas purchase.

Thanks & Regards
bandhu

VISHRUT

VISHRUT (Expert)
Follow

29 August 2011 SUBJECT:
Imposition of Service Tax on services rendered by Custom House Agents and Steamer Agents regarding.

By the issue of Notification No. 17/96-Service Tax dt. 6.6.97, service tax has been imposed on Custom House Agents and Steamer Agents w.e.f. 15.6.97. The service Tax is imposed under the provisions of Chapter V of the Finance Act, 1994 (32 of 1994), as amended.

2. CUSTOM HOUSE AGENTS

In the context of these two services, certain points have been raised for clarification which are discussed below:

2.1 The expression "Custom House Agent" has been defined to mean a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of Section 146 of the Custom Act, 1962. A person is permitted to operate as a Custom House Agent, temporarily under regulation 8(1) and permanently Regulations, 1984.

2.2 As per the Finance Act, 1997, the taxable service rendered by a Custom House Agent means any service provided to a client by a Custom House Agent in relation to the entry or departure of conveyances or the import or export of goods. The value of the taxable service in relation to the service provided by a Custom House Agent to a client has agent from the client for services rendered in any manner in relation to import or export of goods. The service tax is chargeable @ 5% on the value of the taxable service.

2.3 The services rendered by the Custom House Agent are not merely limited to the clearing of the import and export consignment. The CHA also renders the service of loading/ unloading of import or export goods from /at the premises of the exporter / importer, the packing, weighment, measurement of the export goods, the transportation of the export goods to the customs station or the import goods from the customs station to the importer’s premises, carrying out of various statutory and other formalities such as payment of expenses on account of octroi, destuffing/pelletisation, terminal handling, fumigation, drawback/ DEEC processing, survey / amendment fees, dock fees, repairing and examination charges, landing and container charges, statutory labour charges, testing fees, drug control formalities, sorting / marking / stamping / sealing on behalf of the exporter / importer. The Custom House Agent also incurs various other expenses such as crane / fork lift charges, taxi charges, photostat and fax charges, bank collection charges, courier service charges, and miscellaneous other expenses on account of the exporter / importer. For all the above charges, the CHA is ordinarily reimbursed by the importer / exporter for whom the above services are rendered. Apart from the above charges, the CHA also charges the client for his service under the head / nomenclature of ‘agency and attendance charges’ or similar kind of heads which is purported to be his service charge in respect of the services rendered in relation to the import / export goods.

2.4 It is clarified that in relation to Custom House Agent, the service tax is to be computed only on the gross service charges, by whatever head / nomenclature, billed by the Custom House Agent to the client. It is informed that the practice obtaining is to show the charges for services as " agency commission", "charges", "agency and attendance charges", "agency charges" and some similar descriptions. The service tax will be computed only with reference to such charges. In other words, payments made by CHA on behalf of the client, such as statutory levies (cess, Customs duties, port dues, etc.) and various other reimbursable expenses incurred are not to be included for computing the service tax.

2.5 In many cases, the Customs House Agent undertakes "turnkey" imports and exports where a lump sum amount is charged from the client for undertaking various services. In these cases, the lump sum amount covers not only the "agency commission" fee but also other expenses and no separate break-up is given in respect of these expenses. It has been decided that in such cases, the value of the taxable service shall be 15% of the lumpsum amount charged to the client. The Custom House Agents are required to show the service charges as 15% of such lumpsum amount of the bills and Service Tax of 5% will be chargeable on the above 15%.

2.6 Some times, CHAs sub-contract their work to CHAs located in other stations. In such cases, it is possible that the sub-contracting CHA raises the bill on the main CHA who in turn raises the bill to the client. It has been decided that in such cases, the sub-contracting CHA will not be required to pay service tax on the bills raised by him on the main CHA, The service tax will be payable by the CHA who provides the actual service to the client and raises the bill to the client.

2.7 A CHA may have various branch offices located at different stations but all these branch offices do not raise the bills and only the main or central office will be raising the bills. In such cases, only the central office should be registered with the Department.

2.8 Sometimes, the bills raised by the CHA are not entirely paid by the client and the CHA is forced to give discounts. In such cases where the final bill raised is lower than the initial bill, it may be mentioned that the law provides for claiming of refund of excess service tax paid within six months from the date of payment of tax. If the CHA can produce evidence of having charged less services fee, he may claim refund of excess service tax paid, if any, as per the provisions of law.

3. STEAMER AGENTS

3.1 The expression ‘Steamer Agents’ has been defined to mean any person who undertakes, either directly or indirectly.

to perform any service in connection with the ships’ husbandry or dispatch including the rendering of administrative work related thereto; or

to book, advertise or canvass for cargo for or on behalf of a shipping line; or

to provide container feeder services for or on behalf of a shipping line;

3.2 The taxable service provided by a steamer agent to a shipping line, is the service provided by a Steamer Agent in relation to a ships’ husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services. The value or the taxable service in relation to service provided by a steamer agent to a shipping line, shall be the gross amount charged by such agent from the shipping line for services in relation to a ship’s husbandry or dispatch or any administrative work related thereto or in relation to the booking, advertising or canvassing of cargo, container feeder services including the commission paid to such agent.

3.3 Steamer Agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to port authorities and transporters such as CONCOR / railways, private transporters, chartered accountants fee, income tax, brokerage paid on export cargo, ship handling expenses paid to stevedoring agents. For all the above charges the Steamer Agent is ordinarily reimbursed by the Shipping line. Further, the Steamer Agent bill the principals i.e. the shipping line, for two types of service charges. One is called the husbandry fee which they charge for a ships’ husbandry. The second is the agency commission which is paid by the shipping line on the import and export cargo. These commissions are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the Steamer Agent and shipping line.

3.4 It is clarified that in relation to the Steamer Agent, the service charges will constitute the husbandry fee as well as the agency commission on import / export cargo. Other expenses incurred by the Steamer Agent on behalf of the shipping line shall not be taken into account.

3.5 It has been represented that the accounting for purposes of service tax should be on per voyage, per vessel basis and further that the registration for service tax purposes should be done only of their seaport offices. It has been decided that only such sea port offices of the Steamer Agent should be registered for service tax purpose which are raising the bill to the shipping lines. The branch offices in ICDs which are just sales offices and do not raise any bills to the shipping line, need not be registered. This is for the reasons that billing is done by the sea port offices and not the branch offices.

4. MISCELLANEOUS

4.1 It may be mentioned that the provisions of Section 68 and 76 of the Finance Act, 1994, as amended by the Finance Act, 1997 will also come into force from 15th June 1997. Section 67(2) of the Finance Act, 1994 provides that the service tax collected during a month shall be deposited to the Government account by the 15th of the succeeding month. Section 68(3) of the Finance Act, 1994 as amended, provides that a person responsible for collecting the service tax who fails to collect such tax shall be liable to pay service tax to the Government within 75 days from the close of the month in which the service was rendered. Section 76 further provides that in case of failure to pay the tax within the period of 75 days, the person responsible for collecting the service tax shall in addition to the tax and interest payable thereon be liable to pay a penalty.

4.2 As per section 69 of the Finance Act, 1994, read with rule 3 and 4 of the Service Tax Rules, 1994, every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under rule 3. Notification No. 18/97 – Service Tax, dated 6.6.97 amends rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the services provided by a CHA or a Steamer Agent shall be the CHA or the Steamer Agent, as the case may be, who raises the bill for services rendered and shall include each of the offices of such agents which raise the bill for services rendered to their client or their principal, as the case may be.

4.3 Rules relating to levy of service tax on other services are already in existence. The procedure to be followed for the registration, maintenance of documents, filing of returns and manner in which the service tax is to be paid, is given below:

Registration

Every person in the jurisdiction of Mumbai-I Central Excise commissionerate who is responsible for collecting the Service Tax shall make an application to the Assistant Commissioner, Service Tax Cell, New Central Excise Building, 115, M.K. Road, Mumbai-400 020 in Form ST-I for registration. When an assessee provides taxable services from more than one premises or office, he shall make separate application for registration in respect of each such premise or office.

When a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration.

When a registered assessee ceases to carry on the activity for which he is registered, he shall surrender his registration certificate immediately to the Central Excise authorities.

Payment of Service Tax

The Service Tax collected during any calendar month shall be paid to the credit of the Central Government by 15th of the following month in form TR-6 challan (yellow colour) e.g., for the month of June 1997, it should be credited latest by 15th of July, 1997. The head of account for the above 2 services will be intimated shortly.

Any person, responsible for collecting the service tax who fails to collect the tax shall, notwithstanding such failure, be liable to pay such tax to the credit of the Central Govt. within 75 days from the end of the month in which the service was rendered.

Interest on Delayed Payment of Service Tax

If any assessee fails to pay or credit the Service Tax or any part thereof in time, he shall pay simple interest @1.5% for every month or part of a month by which such payment / crediting of the tax or any part thereof is delayed.

Filling of Quarterly Returns

A Quarterly Return in Form ST-3 (in triplicate) should be filed within 15 days of the end of the preceding quarter, i.e. latest by 15th July, 15th October, 15th January and 15th April for the quarters ending June, September, December and March respectively.

Penalty for failure to collect or pay Service Tax

If any person responsible for collecting Service Tax fails to collect such tax, he shall be penalised a sum equal to the amount of Service Tax which he failed to collect, besides paying the actual amount of tax and the interest thereon.

If any person, fails to pay the Service Tax to the credit of the Central Govt. in time after having collected the service tax, he shall pay a penalty of Rs. 100/- which may extend to Rs. 200/- per day during which such failure continues, besides paying the actual service tax and the interest thereon. However, the penalty in this case shall not exceed the amount of Service Tax that he failed to pay.

Note: The amount of Service Tax collected should be separately shown on the invoice for the service provided.

Penalty for failure to furnish the Quarterly Return:

If a person fails to furnish the Quarterly Return (including "Nil" return) in form ST-3 in time, i.e.. by 15th July, 15th October, 15th January and 15th April for the quarters ending June, September, December and March respectively, he shall be penalised with a sum of Rs. 100/- extendable to Rs. 200/- for every day during which the failure continues.

Penalty for suppressing value of taxable service

If any person is found concealing or supperssing the value of taxable service or has furnished inaccurate value, etc., such person shall be penalised a sum upto twice the amount of service tax sought to be evaded by reasons of suppression, concealment, etc. besides paying the actual service tax and interest, if any.

Apart from the above penalties, persons committing offences under Chapter V of the finance Act, 1994 would also be liable to prosecution in certain cases.

Records

Every assessee shall furnish to the Central Excise Officer at the time of filing his quarterly return for the first time a list of all accounts maintained by the assessee in relation to service tax including memoranda received from his branch offices.

5. The following Annexures are enclosed for the information of the tax-payers.

Annexure No.

Particulars

I

From ST-1

II

From TR-6

III

From ST-3