Dear friends,
My client is a licensed MTO, CHA and Freight Forwarding agent and is registered with DGFT for sea freight and with IATA and FIATA for air freight. It has a well connected worldwide network and an excellent relationship with major international airlines and shipping lines which enables them to provide a host of services to their clients.
For exporters:
Export consolidation air and sea
Pre-shipping documentation
Inland transportation
Custom clearance
Post-shipping documentation
Port/Airport to door delivery
For importers:
Pre-import consultancy to new projects and approvals
Inland transportation
Custom clearance
Consolidation air/sea
Port/Airport to door delivery
In this case the query is whether the turnover must be gross of the value of freight, local airport/port charge, local transport charges that it charges to its customers? In which case the costs incurred against these heads must be reflected separately to arrive at operating profit.
Or will it be acceptable to record only its service charges and the profit which it makes from the recovereies (by maintaining a separate control a/c ) from its clients/agents as it turnover? Kindly advise which will be the correct method of accounting as per the Indian Accounting standards alongwith referance to cluase. Would appreciate feedback from persons having clients in similar line of business.
Thanks and regards,
4 Replies
Jayant Shaligram
(Service)
(146 Points)
Replied 27 June 2007
Hi,
I had seen the reply to the querry but am not satisfied. Since the querry status was resolved I am taking this opportunity here to write my interpretation.
AS 9 Revenue recognition
Refer Definitions :
Para 4.1
"Revenue is the gross inflow of cash, receivables or other consideration arising in the course of ordinary activities of an enterprises from sale of goods, from rendering services, and from the use by others of enterprise resources yieldingg interest, royalties and dividends.
Revenue is measured by charges made to customers or clients for goods supplied and services rendred to them and by the charges and rewards arising from the use of resources by them.
In an agency relationship, the revenue is the amount of commission and not the gross inflow of cash, receivables or other consideration."
The Last line is important. The revenue and the turnover will the actual amount of service commission charged to the client and not the gross inflow.
There is a circular on the same line on Service Tax whcih I will try to forward you later.
Ask you client to prepare two different bills. One for reimbursement and other for the fees for services rendered.
Thanks.
Jayant Shaligram
Vinita
(23 Points)
Replied 27 June 2007
Dear jayant,
I too was not satisfied with expert response, I was perosnally more inclined towards the net disclusure after interpreting AS-9 as you did. Now that you mention service tax, i had a related query,w hcih i missed to mention. My client is making profit on remibursables, and they are levying service tax only on theri service charges. So there is a huge discrepanice between the net turnver reflected and the service tax paid by them. I wished to knwo if other freight forwarders too follwo similar pratice? The circualr which you mentioend may help me clear my doubts in this respect. I would appreciate if you can send it. Also as regards TDS point that the expert mentioned, do you think that amy mismathc will create problems in Income tax.
Your inputs arre highly appreciated. Many thanks.
(Guest)
| Originally posted by :Guest | ||
| " | Hi Is it correct to charge service tax charged on the gross bill amount by a freight forwarder where bill is for freight and other services and reimbursements |
" |
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