Ocean Freight - Service Tax confusions cleared
By Anand Chauhan
NEW DELHI, APR 15, 2017: CBEC realised the inconsistency in the provision of payment of service tax by shipping agent, in case of inward ocean freight when both service provider and receiver are out of taxable territory. Vide three notifications the CBEC has cleared the issues related to -
1) with effect from 23/04/2017 -
a. Person liable to pay service tax will be - Importer of Goods
b. Accordingly importer can take CENVAT Credit,- on Service Tax payment challan
2) With effect from 22/01/2017 -
a. Option of Service Tax on - 1.4% of CIF Value of imported goods.
b. Point of Taxation will be- Date of Bill of Lading.
For this CBEC has issued notification 13/2017-ST, 14/2017-ST and 15/2017-ST all dated 13-04-2017.
Vide Notification 13/2017, item EEC in sub-clause (i) of clause (d) of sub-Rule (1) of Rule 2 of the Service Tax Rules, 1994, i.e. item under definition for "person liable for paying service tax" in respect of taxable services notified, under sub-section (2) of Section 68, has been substituted as -
"(EEC) in relation to services provided or agreed to be provided bya person located in non-taxable territory to a person located in non-taxable territory byway of transportation of goods by a vessel from place outside India up to the customs station of clearance in India, the importer as defined under clause (26) of section 2 of the Customs Act, 1962 (52 of 1962) of such goods ;"
Similarly vide, notification 15/2017, explanation IV of Notification 30/2012, notifying services under section 68(2)(reverse charge), has been replaced by explanation V as under-
"Explanation V.-For the purposes of this notification, in respect of services provided or agreed to be provided bya person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying service tax other than the service provider shall be the importer as defined under clause (26) of section 2of the Customs Act, 1962 (52 of 1962)of such goods."
So, now w.e.f. 23-04-2017, instead of shipping agent, the importer will be liable to pay service tax, and accordingly now, he can take CENVAT credit on the basis of challan against payment of service tax. Earlier, the document for taking CENVAT credit was missing, which has been made available now.
Further, vide Notification 13/2017, one additional option has been provided for payment of service tax @ flat rate of 1.4% on CIF value of imported goods. This option has been made available w.e.f. 22-01-2017, so service tax payment by shipping agents will also get option of, flat rate of 1.4% of CIF value of imported goods. This option has been provided by insertion of sub-rule 7CA in rule 6 of the Service Tax Rules, 1994, as under-
"(7CA) The person liable for paying service tax for the taxable services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall have the option to pay an amount calculated at the rate of 1.4% of the sum of cost, insurance and freight (CIF) value of such imported goods."
Further one more confusion related to point of taxation has also been resolved vide Notification 14/2017, making the date of Bill of Lading, as the point of tax, for this rule 8B has been inserted in the Point of Taxation Rules, 2011 as under-
"8B. Determination of point of taxation in case of services provided by a person located in non-taxable territory to a person in non-taxable territory.- Notwithstanding anything contained in these rules, the point of taxation in respect of services provided by a person located in non-taxable territory to a person in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall be the date of bill of lading of such goods in the vessel at the port of export."
Also read - Service Tax - Ocean Freight - An analysis
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