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Service tax on ocean freight

18 October 2016

Dear all With the recent budgetory changes, Transportation of goods in a vessel is out of the purview of Notfn 25/2012-ST. Consequently, Srl No. 10 of Notfn 26/2012 gets invoked for the Category of Service, whereby the specific condition is NO Cenvat is availed. This forum, therefore, needs to consider this for discussion. Especially for the reason that the implications are --- payment of full rate of 14% plus plus on out-service when set-off is availed on in-service (irrespective of the rate of tax paid to shipping liners)

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5 Replies

Mahendra (Chartered Accountant) (154 Points)
Replied 18 October 2016

In the 2016 budget, following changes made with respect to Ocean Freight (Service tax)

1. Ocean export Freight : Which are earlier considered as exempt &/or export service (depending upon the condition) since place of provision of service will be place of destination of goods. In the budget, such export ocean freight become zero rated service (by making changes in the definition of exempted service in CENVAT Credit Rule) by virtue of which input credit against the same will be avaiilable as credit.

2. Ocean Import Freight : Which was earlier considered as exempt service as per negative list. In 2016 budget it become taxable after taking abatement of 70% and input credit against the same will be available as credit.

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Dr A SUBRAHMANYAM (CEO) (95 Points)
Replied 18 October 2016

Dear Sir

The abatement of 70% flows from Notfn 26/2012-ST where the stipulated condition is No Cenvat to avail.

Dr A SUBRAHMANYAM (CEO) (95 Points)
Replied 18 October 2016

Dear Sir

Furthermore, Explanation at the end of Rule 3 of Cenvat Credit Rules is explicit whereby such other provisions/conditions of notification prevails over the Cenvat Credit Rules, and accordingly, condition stipulated in Notfn 26/2012-ST comes into foray.

Dr A SUBRAHMANYAM (CEO) (95 Points)
Replied 19 October 2016

Dear Sir

You are right. The Notification 08/2016-ST dt. 1.3.16 excluded input services from the purview of "condition" for the services of Srl. No. 10 of Notfn 26/2012. Thanks Sir

Mahendra (Chartered Accountant) (154 Points)
Replied 19 October 2016

Dear Sir,

Here the main issue which industry is facing is on the double tax. Firstly on import consignment therei will be a customs duty on Landing cost which includes freight, plus there will be a service tax. Indutries who are in the trading are facing a bigger issue.