Service tax on freight forwarders on transportation of goods from India

F. No. 137/54/2016-Service Tax-Part-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Service Tax Wing

Circular No. 197/7/2016 -Service Tax

New Delhi, the 12th August, 2016

To,

All Principal Chief Commissioners / Chief Commissioners of Central Excise/Service Tax

Principal Directors General/Director General Goods & Service Tax/ DGCEII Systems/Audit/ Tax Payer Services/Performance Management

Chief Commissioner AR CESTAT

All Principal Commissioners/Commissioners of Central Excise/Service Tax

All Principal Additional Directors General/ Additional Directors General Audit

Madam/Sir

Subject: Service tax on freight forwarders on transportation of goods from India

The Board has received representations regarding service tax on freight forwarders on transportation of goods from India.

2.0 It may be noted that in terms of rule 10 of the Place of Provision of Services Rules 2012, (herein after referred to as ‘POPS Rules 2012‘, for brevity) the place of provision of the service of transportation of goods by air/sea, other than by mail or courier, is the destination of the goods. It follows that the place of provision of the service of transportation of goods by air/sea from a place in India to a place outside India, will be a place outside the taxable territory and hence not liable to service tax. The provisions of rule 9 of the POPS Rules 2012, should also be kept in mind wherein the place of provision of intermediary services is the location of the service provider. An intermediary has been defined, inter alia, in rule 2(f) of the POPS Rules 2012, as one who arranges or facilitates the provision of a service or a supply of goods between two or more persons, but does not include a person who provides the main service or supplies the goods on his own account. The contents of the succeeding paragraphs flow from the application of these two rules.

2.1 The freight forwarders may deal with the exporters as an agent of an airline/carrier/ocean liner, as one who merely acts as a sort of booking agent with no responsibility for the actual transportation. It must be noted that in such cases the freight forwarder bears no liability with respect to transportation and any legal proceedings will have to be instituted by the exporters, against the airline/carrier/ocean liner. The freight forwarder merely charges the rate prescribed by the airline/carrier/ocean liner and cannot vary it unless authorized by them. In such cases the freight forwarder may be considered to be an intermediary under rule 2(f) read with rule 9 of POPS since he is merely facilitating the provision of the service of transportation but not providing it on his own account. When the freight forwarder acts as an agent of an air line/carrier/ocean liner, the service of transportation is provided by the air line/carrier/ocean-liner and the freight forwarder is merely an agent and the service of the freight forwarder will be subjected to tax while the service of actual transportation will not be liable for service tax under Rule 10 of POPS.

2.2 The freight forwarders may also act as a principal who is providing the service of transportation of goods, where the destination is outside India. In such cases the freight forwarders are negotiating the terms of freight with the airline/carrier/ocean liner as well as the actual rate with the exporter. The invoice is raised by the freight forwarder on the exporter. In such cases where the freight forwarder is undertaking all the legal responsibility for the transportation of the goods and undertakes all the attendant risks, he is providing the service of transportation of goods, from a place in India to a place outside India. He is bearing all the risks and liability for transportation. In such cases they are not covered under the category of intermediary, which by definition excludes a person who provides a service on his account.

3.0 It follows therefore that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India.

4.0 Keeping this in mind, field formations may deal with cases purely on the basis of the facts of the case, the terms of contract between the entities concerned, the provisions of the Finance Act, 1994, the POPS Rules 2012 and other rules.

Yours faithfully

(Dr.Gaurav Mittal)
Officer on Special Duty
Service Tax Wing
mittal.drgaurav@gov.in
Phone: 011-23095438

Benefits of GST

There cannot be a better way to celebrate India’s independence. The dream to have GST in India may soon be a reality now. The month of August once again became historic after August of 1947 when India attained independence from British Raj. August 2016 created a historic achievement once again as India march ahead on the road to fiscal freedom on tax front as 122nd Constitutional Amendment has been approved by both the houses of Indian Parliament i.e, on 3rd August 2016 by Rajya Sabha (upper house) and on 8th August, 2016 by Lok Sabha (lower house). What a gift to Indian citizens and businessmen in 70th year of Independence.

Goods and Services Tax (GST)

GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Benefits of GST

The benefits of GST accruing to various stake holders can be summarized as under:

For business and industry

1. Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

2. Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

3. Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

4. Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

5. Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

Are You Prepared For GST?

Preparedness for GST in next few months will involve Tax Planning Review, Transactions Review, Training Manpower, Cost Effectiveness in Inventory, logistics & Final goods, business Planning with anticipation of new tax structure with competition, Fastest Implementation & Transition to GST, Procurement and Purchase Orders Implementation, Invoicing Patterns, Proper Implementation of GST Transition in input stage credit, tax management versus business operations, various misc provisions, etc.

One has to take all steps to ensure that no dispute arises during transition and thereafter. If precautions and safeguards are not taken, well in time, during the pre and post implementation period of GST regime, then the possibility of litigation, due to ignorance and/ or non implementation, cannot be ruled out.

The nation is on the cusp of executing one of the most ambitious and remarkable  tax reforms in its independent history. Implementing a new tax, encompassing  both goods and services, to be implemented by the Centre, 29 States and 2 Union  Territories, in a large and complex federal system, via a constitutional amendment  requiring broad political consensus, affecting potentially 2-2.5 million tax entities,  and marshalling the latest technology to use and improve tax implementation capability, is perhaps unprecedented in modern global tax history. The time is ripe to collectively seize this historic opportunity.

- See more at: http://taxguru.in/goods-and-service-tax/freedom-multiple-taxes-gst-regime.html#sthash.fYgynT1p.dpuf

Due date for Acknowledgement of Declarations under IDS,2016

F.No.142/8/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***

New Delhi, dated 12^th August, 2016

Order under section 119 of the Income-tax Act, 1961

Sub-rule (3) of rule 4 of the Income Declaration Scheme, Rules, 2016 (the Rules) provides that the acknowledgment in Form-2 is to be issued by the Principal Commissioner/Commissioner to the declarant within 15 days from the end of the month in which the declaration has been furnished. Hence, the acknowledgment in Form-2 for the declaration filed in the month of July, 2016 is required to be issued by 15^th August, 2016.

Time schedule for payment of tax, surcharge and penalty payable under the Income Declaration Scheme, 2016 has been extended vide notification No. S.O.2476(E) dated 20.07.2016 in the manner specified therein. Accordingly, necessary amendments to Form-2 as prescribed in the Rules are in the process of being made.

In view of the above, in exercise of the powers conferred by section 195 of the Finance Act, 2016 read with section 119 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby extends the time for issuance of acknowledgment in Form-2 as prescribed in sub-rule (3) of rule 4 of the Rules from 15 days to 30 days in respect of the declarations filed under the Scheme in the month of July, 2016.

(Dr. T.S. Mapwal)

Under Secretary to the Government of India