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Service tax on extra courier charges collected

CA Shweta Purswani (Practicing Chartered Accountant ) (417 Points)

18 June 2014

There is one query regarding the Implication of the service tax on the following situation:

we are exporting the goods in foreign and for instance the invoice is made showing the courier charges of Rs 100 and the courier charges paid to the agency is Rs 80 and Rs 20 are kept in our pocket.

During the year these type of transactions are very much material.

Is there any service tax on the amount of Rs 20 kept in our pocket?

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4 Replies

Vikas (CA) (1135 Points)
Replied 18 June 2014

Hi Shweta,

Firstly, let me tell you that I am not very sure of the answer, because if we refer to the place of provision of services rules, 2012, the Rule 4 shall be applicable to such services [refer Education guide]. However, since, its an international transaction, various countries would be involved. Therefore, it could get covered under Rule 7 of hte PPSR. In which case, in case if a part of the activity is performed in India, would make the entire activity taxable in India.

So there is a possibility that the entire consideration of 100 would be taxable in your hands.

I would also like to invite my learned friends to comment on the taxability on international courier charges in terms of PPSR.

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Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 18 June 2014

Scenario 1.

If such courier charges included in the export invoice only then it is a part and parcel of export of goods, hence no implicaiton under Service tax or Excise.

Scenario 2.

If the exporter raise the separate invoice to the courier charges , then the activity would fall under 3 of POP. as the service receiver is in abroad, hence not liable under service tax.

PLACE OF PROVISION GENERALLY - The place of provision of a service shall be the location of the recipient of service:

Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.

Vikas (CA) (1135 Points)
Replied 19 June 2014

Dear Venkat,

I think you have not read my earlier comments.

The goods are required to be made available to the courier agency, hence, such services are to be covered under Rule 4 of PPSR. This can also be seen in the examples given for Rule 4 of the PPSR.

Hence, the interpretation is needed indeed.

However, with respect to the Scenario 1, I agree with you. I forgot to comment on that.

CA Shweta Purswani (Practicing Chartered Accountant ) (417 Points)
Replied 19 June 2014

Dear Venkat,

Will you please elaborte the scenario 1. What is the exact meaning of it?

"Scenario 1. If such courier charges included in the export invoice only then it is a part and parcel of export of goods, hence no implicaiton under Service tax or Excise."