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Service tax applicability

Mayank Berlia (Articles) (191 Points)

11 July 2012

One of my clients is a C&F agent, has a turnover of less than 9 lakhs. He pays for the freight for delivery of the goods to the companies dealers. The freight charges are reimbursed to him by the company. Will the freight charges attract service tax. And will the freight be also taken for calculation of the exemption limit of 9 lakhs.

mayankberlia @ gmail.com

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5 Replies

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 11 July 2012

If the consignment notes are issued in the name of the C&F agent service tax liability is of the C&F agent even only, who after paying the same get it reimbursed from the company. There is no exemption available base on turnover if service tax is chargeable under reverse charge. Hope this solves your query.

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Mayank Berlia (Articles) (191 Points)
Replied 11 July 2012

The Consingment bills raised by the transporter are in the name of the company will then the C&F will not hav to pay the service tax.

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 11 July 2012

The limit i.e threshold limit for taxability in terms of service tax does not apply in case of REVERSE CHARGE..

It has been stated in threshold notification itself, wherein it has clearly been said that the threshold exemption will not apply in two case .First in the case where services provided bears a brand with it and the second when service tax is paid by a person other than the service provider, the case covered under 68(2) of the Finance Act,1994. Clearly, the threshold exemption will not be available or ,better to say, not applicable in reverse charge issue.

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 11 July 2012

The relevant judgement which clearly states the fact:-

CESTAT, South Zonal Bench, Bangalore in the case of Nazeer & Co. Versus Commissioner of Central Excise, Kochi, 2008-TIOL-2384-CESTAT-BANG where in it was held as follows.

“…For the services rendered as C & F agents, they are receiving remuneration from its Principal. The appellants are also meeting certain expenses like, freight, courier charges (postage), transportation charges, telephone charges, loading & unloading charges, etc. on behalf of the Principal. The Principal, on actual basis, on submission of bills, reimburses these expenses. In the case of freight, bills are issued by the transporting companies in the name of the Principal. In the case of telephone, the phone itself is in the name of the Principal. Similarly the bills issued by the courier are in the name of the Principal. It was urged that for convenience, the appellants are paying the bills at the first instance, which are subsequently reimbursed by the Principal on actual basis.

Apart from the service charges, the appellants were getting reimbursement of all the expenses paid for by it on behalf of the Principal.

….if certain amounts are spent by the C & F agent on behalf of the Principal and later they are reimbursed then such amount would not be liable for service tax.”

Since some of the above expenses were incurred in the name of the Principal, it appears the decision rendered above holds good for the ‘pure agent'.

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 12 July 2012

No under the said circumstance C&F will not be liable to pay any service tax on the same. It will be the liability of the company to pay service tax under reverse charge as service receiver.