Beruflich Dokumente
Kultur Dokumente
Transportation
DISCLAIMER:
The views expressed in this book are of the author(s). The Institute of
Chartered Accountants of India may not necessarily subscribe to the views
expressed by the author(s). The information cited in this book has been
drawn from various sources. While every effort has been made to keep the
information cited in this book error free, the Institute or any office of the same
does not take the responsibility for any typographical or clerical error which
may have crept in while compiling the information provided in this book.
Email : idtc@icai.in
Website : www.icai.org
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Contents
Chapter 1 Introduction 1
Chapter 2 Service Tax Rules, 1994 Pertaining to Transportation Sector 47
Chapter 3 Valuation Rules for Transportation Sector 56
Chapter 4 Reverse Charge Mechanism, 2012 forTransportation Sector 64
Chapter 5 Place of Provision of Service Rules, 2012 pertaining to
Transportation Sector 82
Chapter 6 Place CENVAT Credit Rules, 2004 Pertaining to
Transportation Sector 94
Chapter 7 Notification and Circular Pertaining to Transportation Sector 137
Chapter 8 Head Notes – Judgements 186
Chapter 9 Practical Illustration for Transportation Sector 197
Chapter 10 Frequently Asked Questions on Transportation Sector 203
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Chapter 1
Introduction
A. Taxability on Transportation of Goods by Road
Background
With the invention of wheel, the world has progressed manifold. Through
wheel, even transportation of goods has been made possible from one place
to another which is also one of the key factor in growth of commerce. In
ancient times (at certain places, even today), the goods were transported in
horse cart or camel carts or through humans. With the development of roads,
the transport vehicles have been developed such as trucks, tractors etc by
which movement of goods from one place to another takes place. The
transport operator in case of truck can have their own truck or can take the
same on rent.
The activities performed by the operator of truck are service.
The taxability or otherwise of service tax on the activities of road
transportation is provided in under mentioned paragraphs.
goods transport agency till such time government comes out with the
relevant rules/ notifications prescribing the modalities for levy and collection.
Pursuant to that, the effective date for levy has been specified as
01.01.2005. Notification No 32/2004 was issued which specified that service
tax has to be paid only on 25% of the value, provided CENVAT credit of
inputs or capital goods shall not be taken and benefit of Notification No
12/2003 shall not be taken. The notification has been rescinded and in its
place, Notification No 1/2006-ST on the similar lines has been brought in
wherein abatement on 75% on the value of freight has been provided,
provided CENVAT credit of inputs, input services or capital goods shall not
be taken and benefit of Notification No 12/2003 shall not be taken. After
introduction of Negative list, the said provisions are contained in Notification
No 26/2012-ST dated 20.06.2012.
In addition to this, the exemption has been given if certain products are
transported. The exemption has been provided for taxable service provided
by a goods transport agency to any person, in relation to transport of fruits,
vegetables, eggs, milk, food grains or pulses by road in a goods carriage.
[Notification No. 33/2004-S.T., Dated 3/12/2004 as amended]. On the similar
lines, the exemptions are contained in Notification No 25/2012-ST dated
20.06.2012 after the introduction of Negative List.
The Government also did not wish to tax the small consignments, hence, it
has exempted the services provided by goods transport agency where
consignments transported by road when gross amount charged is upto `
1500/-or when gross amount charged for an individual consignment is upto `
750/-. [Notification No. 34/2004-S.T., Dated 3/12/2004]. On the similar lines,
the exemptions are contained in Notification No 25/2012-ST dated
20.06.2012 after the introduction of Negative List.
The taxable service has been defined as ‘Any service provided or to be
provided to any person, by a goods transport agency, in relation to transport
of goods by road in a goods carriage;’ [Section 65(105)(zzp)]. In this
definition, up to 15.05.2008, it was taxable if the recipient of service was a
customer of GTA. From, 16.05.2008, the word ‘customer’ has been replaced
by ‘any person’ and thus, has broadened the coverage.
There is no basic change in the taxability post introduction of Negative list,
but whatever differences that are there, has been explained in under
mentioned paragraphs.
2
Introduction
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Technical Guide on Transportation
Buyer agrees to take goods in its truck, in such a case, the buyer
provides services to itself. Thus, no question of service tax arises.
Seller arranges for transport of goods by arranging truck. In such a
case, the truck owner carries the goods from one destination to
another, but it would be on behalf of seller. Thus, truck operator acts
as an agent of seller. In such a situation, there will be service tax as
the services are provided by ‘Goods Transport Agency’
In Para 149 of Budget 2004 of the Union Finance Minister's speech, Hon’
Finance Minister has clarified that there is no intention to levy service tax on
truck owners or truck operators.
Thus, only when element of ‘agency’ is present, there will be service tax on
transport of goods by road services provided by Goods Transport Agency.
Case Law
(a) Birla Ready Mix Versus Commissioner of Central Excise,
Noida2013 (30) S.T.R. 99 (Tri. - Del.) = [2013] 59 VST 518 (CESTAT) =
[2012 (12) TMI 736]
In this case, the assessee was engaged in manufacturing of Read Mix
Concrete ("RMC" for short). They had hired "Transits Mixers", that is,
vehicles specially designed for carryings RMC from place of manufacture to
place of delivery of the goods. The vehicles were provided by the owners to
the appellant for their use as per terms of a contract. The appellant paid
consideration to the vehicle owners which involved certain payments on
monthlybasis and certain payments based on the number of kilometres run.
Revenue demanded tax on the consideration paid by the appellant to the
vehicle owners, considering it as a consideration for services of "Goods
Transport Agency".
In this case, the Hon’ Tribunal, among other things observed that service tax
is levied on the services of a "Goods Transport Agency" and not on services
of a "Goods Transport Operator". The latter term was used in Finance Act
1994 during the period Nov 1997 to June 1998 and the former expression is
being used now. So it is to be understood that these two expressions refer to
different types of persons. 'The mere fact that the operator is doing activity of
transportation cannot make the operator a "Goods Transport Agency". So the
operators in this case cannot be considered as "Goods Transport Agencies"
4
Introduction
[The logic is that no agency relationship arises between the truck owner and
the truck operator]
Consignment Note
One of the condition for levy of service tax on transport of goods by Road is
that the consignment note must be issued.
The provisions regarding issuance of consignment note is contained in Rule
4B of Service Tax Rules, 1994.
As per Explanation to Rule 4B, ‘consignment note" means a document,
issued by a goods transport agency against the receipt of goods for the
purpose of transport of goods by road in a goods carriage, which is serially
numbered, and contains the name of the consignor and consignee,
registration number of the goods carriage in which the goods are transported,
details of the goods transported, details of the place of origin and destination,
person liable for paying service tax whether consignor, consignee or the
goods transport agency’
The consignment Note shall also contain the details of the consignment note
number and date, gross weight of the consignment. [2nd Proviso to Rule 4A
of Service Tax Rules, 1994]
As per Rule 4B, ‘any goods transport agency which provides service in
relation to transport of goods by road in a goods carriage shall issue a
consignment note to the recipient of service.
It has also been clarified in Rule 4B that where any taxable service in relation
to transport of goods by road in a goods carriage is wholly exempted under
section 93 of the Act, the goods transport agency shall not be required to
issue the consignment note.
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Technical Guide on Transportation
6
Introduction
In under mentioned cases, it has been considered that when the transporters
did not issue consignment notes or G` or Challans or any documents
containing the particular as prescribed in Explanation to Rule 4B of the
Service Tax Rules, 1994, the Transporters cannot be called ‘Goods
Transport Agency’ and, hence, in these cases, the service of transportation
of goods provided by the transporters would not be covered in the definition
of Goods Transport Agency. This principle has been held in:
S. Selvam v. CCE [2014 (9) TMI 115 (Chennai- Tri)]
South Eastern Coal Fields Ltd v. CCE [2014 (8) TMI 857 –(Delhi-Tri)]
Carris Pipes & Tubes Pvt. Ltd. Versus Commissioner of Central Excise,
Coimbatore [2013 (8) TMI 294 -(Chennai- Tri)]
Lakshminarayana Mining co. Vs CST Banglore2009 (16) STR (69)
affirmed by Karnataka High Court in 2012 (26) STR 517 (Kar.)
KMB Granites Pvt. Ltd. CCE Salem - 2010 (19) STR 437
Bazpur Co-operative Sugar Factory Ltd. Versus Commissioner of Central
Excise, Meerut-II [2012 (8) TMI 752 - CESTAT, NEW DELHI] =[2012] 36
STT 444 (New Delhi - Tri) = 2012 (27) S.T.R. 517 (Tri. - Del.)
Mahi Agro Products Pvt. Ltd. Versus COMMR. OF CUS., C. EX. & ST.,
GUNTUR [2013 (2) TMI 243 –Tri- Banglore] =2012 (28) S.T.R. 300 (Tri. -
Bang.)
Exemptions
Though there is a service tax on transport of services provided by Road, yet,
there are certain sectors wherein government wants to have exemption and
also upto a certain amount, government wants to provide exemption. Hence,
the Central Government has introduced a mega exemption Notification No
25/2012-ST dated 20.06.2012. As per the notification, the services of
transportation of goods in a goods carriage is exempt in the manner specified
hereunder:
Exemption based on the value of freight charged
Where the services are provided by a goods transport agency, by way of
transport in a goods carriage of,-
(i) goods, where gross amount charged for the transportation of goods on
a consignment transported in a single carriage does not exceed one
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Technical Guide on Transportation
Abatement
Central Government has power to prescribe the abatement with respect to
certain services. Abatement means reduction. Central Government has
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Introduction
Valuation
The provisions regarding valuation are contained in section 67 of the Finance
Act, 1994 which reads as
.‘(1) Subject to the provisions of this Chapter, service tax chargeable on
any taxable service with reference to its value shall,—
(i) in a case where the provision of service is for a consideration in
money, be the gross amount charged by the service provider for such
service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not
wholly or partly consisting of money, be such amount in money, with
the addition of service tax charged, is equivalent to the consideration;
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Technical Guide on Transportation
10
Introduction
taxable service from one or more premises, does not exceed ten lakh
rupees in the preceding financial year.
taxable services provided by a person under a brand name or trade
name, whether registered or not, of another person;
The exemption is not available to the persons who are required to pay
service tax as a recipient of service in terms of section 68(2) of the Finance
Act. [2nd Proviso to Para 1 of the Notification]
Thus, the exemption can be claimed by the service provider. In case of
goods transport agency, the service provider can claim exemption in cases
wherein it is required to make payment of service tax.
Instances where service tax is to be paid by service provider in case of
transport of goods by Road:
Where the person paying freight does not fall into specified category of
persons;
When the person paying freight is located in a non-taxable territory;
The Gross amount charged by Goods Transport Agency under Section 67
ibid to the recipient of service shall not to be taken into account for
determining the aggregate taxable value under the small scale
exemption.[Reply to FAQ 8.2 issued by Department dated 05.02.2009]
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Technical Guide on Transportation
12
Introduction
invoice, in such case, the freight has been paid to the truck owner by JSK, a
partnership firm. The liability is only of the person paying freight is with
respect to services provided by goods transport agency and not any other
person.
Point of taxation
The point of taxation refers to the time when the tax is required to be paid.
For the said reason, Point of Taxation Rules, 2011 has been introduced. As
far as transportation of goods by Road is concerned, point of taxation is
required to be seen from service providers view point as well as service
receivers view point.
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Technical Guide on Transportation
point of taxation to the extent of such excess amount, at the option of the
provider of taxable service, shall be determined in accordance with the
provisions of clause (a).
Explanation .- For the purpose of this rule, wherever any advance by
whatever name known, is received by the service provider towards the
provision of taxable service, the point of taxation shall be the date of receipt
of each such advance.
14
Introduction
Provided that, where the payment is not made within a period of three
months of the date of invoice, the point of taxation shall be the date
immediately following the said period of three months:
Provided further that in case of “associated enterprises”, where the
person providing the service is located outside India, the point of
taxation shall be the date of debit in the books of account of the
person receiving the service or date of making the payment whichever
is earlier’
Rule 10 in the Point of Taxation Rules, 2011 has been inserted w.e.f
01.10.2014, which reads as:
Notwithstanding anything contained in the first proviso to rule 7, if the
invoice in respect of a service, for which point of taxation is
determinable under rule 7 has been issued before the 1st day of
October, 2014 but payment has not been made as on the said day, the
point of taxation shall,–
(a) if payment is made within a period of six months of the date of
invoice, be the date on which payment is made;
(b) if payment is not made within a period of six months of the date
of invoice, be determined as if rule 7 and this rule do not exist
The effect of above is summarised as under:
Where the freight is payable as a recipient of service and the invoice is
issued on or before 30.09.2014, in such case, the point of taxation will
be the date of payment where the payment is made within six months.
If the payment is not made within six months, in such a case, the point
of taxation will be determined as if Rule 7 does not exist. Thus, the
matter will fall back to the date of invoice and interest liability will
commence from the date of invoice.
From 01.10.2014, the change has been made from 6 months to 3
months which would indicate that generally the point of taxation in
case where service tax is payable under reverse charge would be the
date of payment, provided the payment is made within 3 months.
Where the payment is not made within 3 months, in such case, the
point of taxation will be immediately following the expiration of three
months. Thus, interest liability commences from the completion of
three months.
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16
Introduction
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Introduction
Place of Provision
The place of provision of services of goods transportation agency shall be
the location of the person liable to pay tax. [ Proviso to Rule 10 of Place of
Provision of service Rules, 2012]
Thus, where goods are to be sent from Goa to Nepal and freight is payable
by consignor, in this case, the service tax is required to be paid by the
consignor.
When freight is payable by a person located in a non-taxable territory, the
provider of such service shall be liable to pay service tax i.e., in such case,
the GTA will have to pay service tax.
Eg. A goods transportation agency ABC located in Delhi transports a
consignment of new motorcycles from the factory of XYZ in Gurgaon
(Haryana), to the premises of a dealer in Bhopal, Madhya Pradesh. Say, XYZ
is a registered assessee and is also the person liable to pay freight and
hence person liable to pay tax, in this case. Here, the place of provision of
the service of transportation of goods will be the location of XYZ i.e.
Haryana. [Para 5.10.3 of Education Guide issued by CBEC]
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Technical Guide on Transportation
20
Introduction
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Technical Guide on Transportation
For availing the said exemption, the exporter has to inform the Assistant
Commissioner of Central Excise or the Deputy Commissioner of Central
Excise, as the case may be, having jurisdiction over the factory or the
regional office or the head office, as the case may be, in Form EXP1
appended to Notification No 31/2012-ST, before availing the said exemption;
Further, the exporter should be registered with an export promotion council
sponsored by the Ministry of Commerce or the Ministry of Textiles, as the
case may be. He should have an IEC number. He should be registered with
the service tax department. He is liable to pay service tax as a recipient of
service tax in terms of section 68(2) of the Finance Act, 1994 read with Rule
2(1)(d) of the Finance Act, 1994.
The invoice, bill or challan, or any other document by whatever name called
issued by the service provider to the exporter, on which the exporter intends
to avail exemption, shall be issued in the name of the exporter, showing that
the exporter is liable to pay the service tax.
The exporter availing the exemption shall file the return in Form EXP2, every
six months of the financial year, within fifteen days of the completion of the
said six months along with certified copies of invoice, bill or challan issued by
the service provide as well as consignment note.
The documents enclosed with the return shall contain a certification from the
exporter or the authorised person, to the effect that taxable service to which
the document pertains, has been received and used for export of goods by
mentioning the specific shipping bill number on the said document.
where the exporter is a proprietorship concern or partnership firm, the
documents enclosed with the return shall be certified by the exporter himself
and where the exporter is a limited company, the documents enclosed with
the return shall be certified by the person authorised by the Board of
Directors.
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Introduction
Legislative History
The levy has been brought into force w.e.f 01.05.2006. Initially,
transportation of goods in containers by rail, by other than Government
railways were taxable under section 65(105)(zzzp). Abatement of 70% was
granted under Sr No 11 of Notification No 1/2006-ST without any conditions.
Thus, services of container transportation by person other than Government
Railways were made taxable. Thus, services provided by Container
Corporation of India were brought to tax net.
In 2009, Government has increased the scope of this service by imposing
service tax on goods transported by railways including Government railways,
whether in containers or otherwise. However, because of huge hue and cry,
the exemption has been granted to services provided by Government
Railway vide Notification No 33/2009-ST dated 01.09.2009 and thereafter the
said service remained exempted till 30th September, 2012.
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Technical Guide on Transportation
Exemptions
Though there is a service tax on transport of services provided by Rail, yet,
there are certain sectors wherein government wants to have exemption.
Hence, the Central Government has introduced a mega exemption
Notification No 25/2012-ST dated 20.06.2012. As per the notification, the
services by way of transportation by rail or a vessel from one place in India to
another of the following goods
(i) Relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap; [Sr No 20(b) of Notification No
25/2012-ST]
(ii) Defence or military equipments; [Sr No 20(c) of Notification No
25/2012-ST]
(iii) newspaper or magazines registered with the Registrar of Newspapers;
[Sr No 20(f) of Notification No 25/2012-ST]
(iv) railway equipments or materials; [Sr No 20(g) of Notification No
25/2012-ST]
(v) Agricultural produce; [Sr No 20(h) of Notification No 25/2012-ST]
(vi) Foodstuff including flours, tea, coffee, jaggery, sugar, milk products,
salt and edible oil, excluding alcoholic beverages; [Sr No 20(i) of
Notification No 25/2012-ST]
(vii) Chemical fertilizer, organic manure and oil cakes; [Sr No 20(j) of
Notification No 25/2012-ST]
(viii) Cotton, ginned or baled. [Sr No 20(k) of Notification No 25/2012-ST]
Abatement
Central Government has power to prescribe the abatement with respect to
certain services. Abatement means reduction. Central Government has
granted exemption equal to percentage of abatement specified. The
abatement has been prescribed in Notification No 26/2012-ST dated
20.06.2012.
With respect to service of transportation of goods by Road, Central
Government has provided an abatement of 70% of the value of services. [Sr
No 7 of the Notification no 26/2012-ST]. Thus, service tax is required to be
paid only on 30% of the value of services. There are no conditions attached
to it.
24
Introduction
CENVAT Credit
Railway provides taxable as well as exempted service. In this regard, for
providing taxable service, CENVAT credit of inputs, capital goods and input
services are available. However, railway provides both taxable and exempted
services. Thus, as per Rule 6 of CENVAT Credit Rules, under mentioned
options are available for Railways.
Maintain separate accounts with respect to provision of taxable and
exempted services and avail CENVAT credit only to that extent which
pertains to provision of taxable services.
If the railway chooses not to maintain separate accounts with respect
to provision of taxable and exempted services, then it shall
Make payment of amount of 2% of the value of exempted services; or (2% is
special provision for Railways, otherwise, it is 6%)
Avail proportionate credit in terms of Rule 6(3A) of CENVAT Credit Rules,
2004.
Valuation
The provisions regarding valuation are contained in section 67 of the Finance
Act, 1994. The prime principle for valuation of service is the gross amount
charged by the service provider for such service provided or to be provided
by him;
For eg., the freight rate from Concor Container Freight Station VZP to Agra,
for 20 Ft Container for General commodity, the rate for container freight is `
Y/-. In addition to above, the door delivery charges and terminal charges are
collected extra. The service tax is on the gross amount charged for services
provided, therefore, it will also be levied on the door delivery charges and
terminal charges.
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Technical Guide on Transportation
taxable service from one or more premises, does not exceed ten lakh
rupees in the preceding financial year.
taxable services provided by a person under a brand name or trade
name, whether registered or not, of another person;
The text of the notification is attached in chapter VII of this guide.
Point of taxation
The point of taxation refers to the time when the tax is required to be paid.
For the said reason, Point of Taxation Rules, 2011 has been introduced. As
far as transportation of goods by Courier is concerned, point of taxation is as
under.
Date of invoice or payment, whichever is earlier, if the invoice is
issued within the prescribed period of 30 days from the date of
completion of the provision of service.
Date of completion of the provision of service or payment, if the
invoice is not issued within the prescribed period as above. Its effect
has been illustrated in the below mentioned table. [Rule 3 of Point of
Taxation Rules, 2011]
26
Introduction
Place of Provision
Rule 10 of place of provision of Services Rules, 2012 states that the place of
provision of services of transportation of goods, other than by way of mail or
courier, shall be the place of destination of the goods.
Thus, for eg., when goods are booked from Pune to Kashmir, the place of
provision is Kashmir, which is the destination of goods. As the place of
provision of service is in non-taxable territory, therefore, service tax will not
apply.
Similarly, when goods are booked from Kashmir to Pune, the place of
provision is Pune, which is the destination of goods. As the place of provision
of service is in taxable territory, hence, service tax will apply on the same.
Legislative History
The service of transportation of goods by air has been made taxable w.e.f
10.09.2004. Services provided by an aircraft operator (i.e. commercial
concern like an airlines) in relation to transport of goods by an aircraft falls
under this category. Thus, in addition to the actual air-freight charges, all
charges collected towards storing, handling, loading/unloading (done in
relation to air transportation of cargo) by an airlines are also chargeable to
this levy. Subsequently, the term ‘commercial concern’ has been replaced by
the term ‘any person’.
Any services provided or to be provided to any person, by any other person,
in relation to transport of (i) coastal goods; (ii) goods through national
waterway; or (iii) goods through inland water were made taxable w.e.f
01.09.2009. Notification No 30/2009-ST dated 31.08.2009 was issued by
which if certain goods are transported, then the activity was not taxable. As
per Notification No 1/2006-ST, the abatement of 25% was permitted subject
to condition that the CENVAT credit of duty on inputs or capital goods or the
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Technical Guide on Transportation
CENVAT credit of service tax on input services, used for providing such
taxable service, has been taken under the provisions of the CENVAT Credit
Rules, 2004; or benefit of Notification No 12/2003-ST has not been availed.
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Introduction
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Technical Guide on Transportation
Exemptions
Though there is a service tax on transport of services provided by Air, yet,
there are certain sectors wherein government wants to have exemption.
Hence, the Central Government has introduced a mega exemption
30
Introduction
Abatement
Central Government has power to prescribe the abatement with respect to
certain services. Abatement means reduction. Central Government has
granted exemption equal to percentage of abatement specified. The
abatement has been prescribed in Notification No 26/2012-ST dated
20.06.2012. Service tax has to be paid at full rate since no abatement has
been prescribed for transport of goods by air.Thus, service tax will be on
gross amount charged by airlines at full 12% with E Cess of 2% and SHE
Cess of 1% making aggregate rate of 12.36%.
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Technical Guide on Transportation
Valuation
The provisions regarding valuation are contained in section 67 of the Finance
Act, 1994. The prime principle for valuation of service is the gross amount
charged by the service provider for such service provided or to be provided
by him;
For transporting of goods, airlines collect freight. The Letter F. No.
B2/8/2004-TRU, dated 10-9-2004 whose para 6 states that, in addition to the
actual air-freight charges, all charges collected towards storing, handling,
loading/unloading (done in relation to air transportation of cargo) by an
airlines are also chargeable to this levy.
32
Introduction
Point of taxation
The point of taxation refers to the time when the tax is required to be paid.
For the said reason, Point of Taxation Rules, 2011 has been introduced. As
far as transportation of goods by Courier is concerned, point of taxation is as
under.
Date of invoice or payment, whichever is earlier, if the invoice is
issued within the prescribed period of 30 days from the date of
completion of the provision of service.
Date of completion of the provision of service or payment, if the
invoice is not issued within the prescribed period as above. Its effect
has been illustrated in the below mentioned table. [Rule 3 of Point of
Taxation Rules, 2011]
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Technical Guide on Transportation
outside India, say ‘China’, in such case, as per Rule 10, the place of
provision is destination of goods which is ‘The China’ and as per Rule 8, the
place of provision is the location of service receiver, which is ‘The India’; in
such a case, Rule 14 comes to rescue which states that ‘Notwithstanding
anything stated in any rule, where the provision of a service is, prima facie,
determinable in terms of more than one rule, it shall be determined in
accordance with the rule that occurs later among the rules that merit equal
consideration’. Thus, as per Rule 14 read with Rule 10, the place of Provision
of Service is ‘The China’.
The service tax is on services provided in a taxable territory. Section 66B
reads as ‘There shall be levied a tax (hereinafter referred to as the service
tax) at the rate of twelve per cent. on the value of all services, other than
those services specified in the negative list, provided or agreed to be
provided in the taxable territory by one person to another and collected in
such manner as may be prescribed’.As the services are provided in ‘China’
as per Place of Provision of Services Rules, 2012, the transaction is not
subject to service tax in India.
Export of services
For determining whether there is export of service or not, the conditions
stated in Rule 6A of Service tax Rules, 1994 is required to be seen which are
reproduced as under:.
Rule 6A of Service Tax Rules, 1994
(1) The provision of any service provided or agreed to be provided shall
be treated as export of service when,-
(a) the provider of service is located in the taxable territory ,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of
service in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely
establishments of a distinct person in accordance with item (b)
of Explanation 3 of clause (44) of section 65B of the Act
34
Introduction
Thus, where an exporter is sending goods from India to any other country
outside India, say ‘The China’, in such case, as per Rule 10 of Place of
Provision of Service Rules, 2012 r.w. Rule 14 of the said Rules, the place of
provision is destination of goods which is ‘The China’.
However, the service provider and service receiver, both are located in
taxable territory as well as the payment of the service will be in Indian
Rupees, hence, the transaction wherein an exporter is sending goods from
India to any other country outside India, say ‘The China’, will not qualify as
export.
It means that the export benefit (Rebate) will not be available as the
transaction is not qualifying as export. However, service tax is not required to
be paid because the place of provision of service is outside the taxable
territory.
However, when Indian Airlines provides services of transportation of goods
from Britan to Canada, in such case, the place of provision of service is
Canada, the service provider is located in taxable territory, the service
recipient is located outside India and if the consideration is received in
convertible foreign currency, hence, this transaction will qualify as export.
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36
Introduction
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Exemptions
Though there is a service tax on transport of services provided by Road, yet,
there are certain sectors wherein government wants to have exemption and
also upto a certain amount, government wants to provide exemption. Hence,
the Central Government has introduced a mega exemption Notification No
25/2012-ST dated 20.06.2012. However, no exemption has been provided for
transportation of goods by courier.
Abatement
Central Government has power to prescribe the abatement with respect to
certain services. Abatement means reduction. Service tax has to be paid at
full rate since no abatement has been prescribed for courier agency.
Valuation
The provisions regarding valuation are contained in section 67 of the Finance
Act, 1994 which reads as
‘(1) Subject to the provisions of this Chapter, service tax chargeable on
any taxable service with reference to its value shall,—
(i) in a case where the provision of service is for a consideration in
money, be the gross amount charged by the service provider for such
service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not
wholly or partly consisting of money, be such amount in money, with
the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is
not ascertainable, be the amount as may be determined in the
prescribed manner.
38
Introduction
(2) Where the gross amount charged by a service provider, for the service
provided or to be provided is inclusive of service tax payable, the value of
such taxable service shall be such amount as, with the addition of tax
payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any
amount received towards the taxable service before, during or after provision
of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value
shall be determined in such manner as may be prescribed
Explanation.—For the purposes of this section,—
(a) "consideration" includes any amount that is payable for the taxable
services provided or to be provided;
(c) "gross amount charged" includes payment by cheque, credit card,
deduction from account and any form of payment by issue of credit notes or
debit notes and book adjustment, and any amount credited or debited, as the
case may be, to any account, whether called "Suspense account" or by any
other name, in the books of account of a person liable to pay service tax,
where the transaction of taxable service is with any associated enterprise.’
However, the amount collected which is in nature of pure agent will not be
included in the value of taxable services. In this regard, the provisions are
contained in Rule 5 of Service Tax (Determination of Value) Rules, 2006 and
the related extracts of the same is reproduced below.
Rule 5(1) ‘ Where any expenditure or costs are incurred by the service
provider in the course of providing taxable service, all such expenditure or
costs shall be treated as consideration for the taxable service provided or to
be provided and shall be included in the value for the purpose of charging
service tax on the said service. **’
Rule 5(2), ‘Subject to the provisions of sub-rule (1), the expenditure or costs
incurred by the service provider as a pure agent of the recipient of service,
shall be excluded from the value of the taxable service if all the following
conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient of service
when he makes payment to third party for the goods or services
procured;
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Technical Guide on Transportation
(ii) the recipient of service receives and uses the goods or services so
procured by the service provider in his capacity as pure agent of the
recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make
payment on his behalf;
(v) the recipient of service knows that the goods and services for which
payment has been made by the service provider shall be provided by
the third party;
(vi) the payment made by the service provider on behalf of the recipient of
service has been separately indicated in the invoice issued by the
service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such
amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third
party as a pure agent of the recipient of service are in addition to the
services he provides on his own account.
Explanation1. For the purposes of sub- rule (2), "pure agent" means a
person who-
(a) enters into a contractual agreement with the recipient of service to act
as his pure agent to incur expenditure or costs in the course of
providing taxable service;
(b) neither intends to hold nor holds any title to the goods or services so
procured or provided as pure agent of the recipient of service;
(c) does not use such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or
services.
Explanation2.- For the removal of doubts it is clarified that the value of the
taxable service is the total amount of consideration consisting of all
components of the taxable service and it is immaterial that the details of
individual components of the total consideration is indicated separately in the
invoice.
40
Introduction
For Eg.
(a) Courier agencies undertake comprehensive business and provide
integrated transportation, warehousing, packing, inventory management, etc.
whether, the charges for additional facility will be included in the services of
courier.
Ans:
The Government has clarified in its Circular No. 341/43/96-TRU, dated
October 31, 1996 the courier agencies undertake comprehensive business
and provide integrated transportation, warehousing, packing, inventory
management, etc. If these facilities are relatable to door-to-
door transportation, the charges for such facilities are to be included in the
value of taxable services.
(b) Courier agency also undertakes import and export of cargo and there
is also provision in this regard in the Customs Act, 1962. Whether the
amount collected towards payment of custom duties, concor charges etc be
included in Gross Amount charged and service tax is payable on such
amount?
Ans: The service tax is required to be paid on the gross amount charged
from the client. However, if any amount is collected as a ‘pure agent’, then on
the same, service tax is not required to be paid. When a courier agency
makes payment of custom duty/ concor on behalf of client, it acts in the
capacity of pure agent. Hence, the same will not be covered in the gross
amount charged.
(c) In case of VPP service, the charges for courier are to be recovered by
the recipient of goods. In case of VPP service, if the addressee of a value
payable postal article omits to take delivery of it within 7 days following the
date of its first presentation or the date of delivery to him or to his accredited
agent of an intimation of its arrival, the article will be returned to the sender
on the 8th day. However, if in the meantime the addressee has applied in
writing to the post office for detention of the article for a further period not
exceeding seven days beginning with the said 8th day and pays the
prescribed fee the article shall not be returned to the sender until
the expiration of the further period covered by the application. Any fee so
paid shall in no circumstances be refunded. Whether the service tax is
payable on extra amount charged by Post Office?
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Technical Guide on Transportation
Ans: As per section 67 of the Finance Act, 1994, service tax is payable on
the gross amount charged. Thus, service tax is also payable on extra fees /
demurrage collected.
42
Introduction
Point of taxation
The point of taxation refers to the time when the tax is required to be
paid. For the said reason, Point of Taxation Rules, 2011 has been
introduced. As far as transportation of goods by Courier is concerned, point
of taxation is as under.
Date of invoice or payment, whichever is earlier, if the invoice is
issued within the prescribed period of 30 days from the date of completion of
the provision of service.
Date of completion of the provision of service or payment, if the
invoice is not issued within the prescribed period as above. Its effect has
been illustrated in the below mentioned table. [Rule 3 of Point of Taxation
Rules, 2011]
The courier agency also can be covered as a continuous supply
service. As per Rule 2(c) of Point of Taxation Rules, 2011, ‘“continuous
supply of service” means any service which is provided or agreed to be
provided continuously or on recurrent basis, under a contract, for a period
exceeding three months with the obligation for payment periodically or from
time to time, or where the Central Government, by a notification in the Official
Gazette, prescribes provision of a particular service to be a continuous
supply of service, whether or not subject to any condition;’
o For eg. India post provides service to corporate customers and regular
users many value added services including pick-up from the premises,
convenient monthly billings, account management facilities, assistance in
import / export procedures of shipments, corporate tracking facilities, volume
discounts etc. In case of continuous supply service, where the provision of
the whole or part of the service is determined periodically on the completion
of an event in terms of a contract, which requires the receiver of service to
make any payment to service provider, the date of completion of each such
event as specified in the contract shall be deemed to be the date of
completion of provision of service;
If invoice or payment is received prior to that, then date of invoice or
payment, whichever is earlier, shall be the point of taxation.
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Technical Guide on Transportation
Place of Provision
Rule 10 of place of provision of Services Rules, 2012 states that the place of
provision of services of transportation of goods, other than by way of mail or
courier, shall be the place of destination of the goods.
Thus, for courier, Rule 10 will not apply as it specifically excludes ‘service of
transportation of goods by mail or courier’.
The provision of courier service commences as soon as the goods or parcels
are delivered to the courier and concludes when the goods or parcels are
delivered to the destination.
As per Rule 3of place of provision of Services Rules, 2012, ‘The place of
provision of a service shall be the location of the recipient of service’.
Thus, after exclusion of the courier service from Rule 10, it falls under Rule
3.
Export of Services
As per Rule 6A of the Service Tax Rules, 1994, the provision of any service
provided or agreed to be provided shall be treated as an export of service
44
Introduction
when,-
(a) the provider of service is located in the taxable territory ,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in the section 66D of the Act,
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of
service in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely
establishments of a distinct person in accordance with item (b) of
Explanation 3 of clause (44) of section 65B of the Act.
Considering above, let us analyse few cases as to find out whether the
services provided pertains to Export of otherwise.
# Case # 1
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located in India are paying for courier
charges in Indian Rupees.
Ans: In this case, though the parcels are to be delivered outside India and as
perRule 3of place of provision of Services Rules, 2012, ‘The place of
provision of a service shall be the location of the recipient of service’.
Location of service recipient is in India, therefore, place of provision of
service falls in India.
# Case # 2
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located being an exporter makes the
payment from EEFC Account.
Ans: In this case, though the parcels are to be delivered outside India and as
per Rule 3of place of provision of Services Rules, 2012, ‘The place of
provision of a service shall be the location of the recipient of service’.
Location of service recipient is in India, therefore, place of provision of
service falls in India. Even if the payment is received in foreign currency, still
as the location of service recipient is in India, hence, the place of provision of
service falls into taxable territory which is Inida.
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Technical Guide on Transportation
# Case # 3
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located outside India are paying for courier
charges like in case of VPP post.
Ans: In this case, the parcels are to be delivered outside India and as per
Rule 3of place of provision of Services Rules, 2012, ‘The place of provision
of a service shall be the location of the recipient of service’. Location of
service recipient is in outside India, therefore, place of provision of service
fallsoutside India.
If the consideration for services are received in convertible foreign exchange,
then the said activity will be considered as Export of Service.
# Case # 4
UPS:United Parcel Service, Inc., generally known as UPS collects parcels
from their clients to be delivered to India. For delivering the clients, UPS
enters into an agreement with Poonam Couriers located in India for
delivering the parcels to the destination based in India. For this, Poonam
Courier charges UPS. What will be the place of provision of this transaction.
Ans: The place of provision of service as per Rule 3 is location of service
recipient which is located in USA. Hence, the place of provision of service is
USA. [This principle has also been held in Ups Jetair Express Pvt Ltd V. Cce
(Tri Mumbai) 2014 (10) TMI 523.]
46
Chapter 2
Service Tax Rules, 1994 Pertaining
to Transportation Sector
Introduction
Every assessee is required to comply with the service tax law. The basic
procedure regarding registration, payment of taxes, returns etc are contained
in service tax Rules, 1994 read with the provisions of Chapter V of the
Finance Act, 1994. The procedures to the extent applicable to the entities in
transportation sector are discussed in the under mentioned paragraph.
(iii) is having more than one premises or offices, which are engaged in
relation to such service in any other manner, making such person
liable for paying service tax,
and has centralised billing system or centralised accounting system in
respect of such service, and such centralised billing or centralised
accounting systems are located in one or more premises, he may, at his
option, register such premises or offices from where centralised billing or
centralised accounting systems are located. The centralized registration will
be given by the Commissioner of Central Excise.
With respect to transportation of goods service where the person liable to
pay freight falls into the category of specified persons, basic exemption limit
of ` 10 lakhs will not be available. Similarly, when a person provides services
under a brand name or trade name of others, in such case, basic exemption
limit of ` 10 lakhs is not available. In such case, registration is required to be
made.
In any other case, exemption uptoaggregate value of taxable servicesupto
the value of ` 10 lakhs is provided, however, registration is required to be
made when the value of taxable services provided reaches at the level of ` 9
lakhs. This provision is contained in Service Tax (Registration of Special
Category of Persons) Rules, 2005. Similarly, when an input service
distributor wants to distribute the credit, it has to get itself registered.
The registration certificate will be given in Form ST-2.
If a person fails to gets registered then, the person is liable to penalty upto `
10000/- [Section 77(1)(a) of the Finance Act, 1994]
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Service Tax Rules, 1994 Pertaining to Transportation Sector
as the case may be, challan shall be serially numbered and shall contain the
following, namely:-
(i) the name, address and the registration number of such person;
(ii) the name and address of the person receiving taxable service;
(iii) description and value of taxable service provided or agreed to be
provided; and
(iv) the service tax payable thereon.
The second proviso further states that in case the provider of taxable service
is a goods transport agency, providing service to any person, in relation to
transport of goods by road in a goods carriage, an invoice, a bill or, as the
case may be, a challan shall include any document, by whatever name
called, which shall contain the details of the consignment note number and
date, gross weight of the consignment and also contain other information as
required under this sub-rule. [2nd Proviso to Rule 4A of Service Tax Rules,
1994]
Thus, consignment note is essential document that is required to be provided
by an agency providing services of transport of goods by road. The
provisions relating to issuance of consignment note is contained in Rule 4B
of Service Tax Rules, 1994. Rule 4B states that ‘any goods transport agency
which provides service in relation to transport of goods by road in a goods
carriage shall issue a consignment note to the recipient of service.’
Further, meaning of consignment note has been explained in Explanation to
Rule 4B which states that ‘consignment note" means a document, issued by
a goods transport agency against the receipt of goods for the purpose of
transport of goods by road in a goods carriage, which is serially numbered,
and contains the name of the consignor and consignee, registration number
of the goods carriage in which the goods are transported, details of the
goods transported, details of the place of origin and destination, person liable
for paying service tax whether consignor, consignee or the goods transport
agency.’
Thus, person providing transport of goods by road has to issue consignment
note along with invoice and other service provider has to issue invoice, bill
orchallanwhich has the details as contained in Rule 4A.
Any person who issues invoice in accordance with the provisions of the Act
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Technical Guide on Transportation
50
Service Tax Rules, 1994 Pertaining to Transportation Sector
The service tax can be paid through internet banking or by utilizing CENVAT
credit, if permitted.
From 01.10.2014, Rule 6(2) of Service Tax Rules, 1994 states that ‘Every
assessee shall electronically pay duty through internet banking’. Thus, it
becomes mandatory for every assessee now to make e-payment compulsory.
However, there arises some issues whereby a person is not in a position to
do internet banking say., the password has been blocked, or the username
and password for net banking has not been provided by the bank or any such
reasons. As a reason, a safegauard has been made by inserting a proviso
which states that the Assistant Commissioner or the Deputy Commissioner of
Central Excise, for reasons to be recorded in writing , allow an assessee
payment of duty by any mode other than internet banking.
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Technical Guide on Transportation
It is to be noted that the reduction has been given where tax is required to be
paid as a service provider and not as a service recipient. Thus, where a
person is required to pay service tax as a recipient of service, interest at 18%
will have to be paid.
To encourage prompt payment of service tax, it is being proposed to
introduce interest rates which would vary on the extent of delay [Notification
No.12/2014-ST]. Simple interest rates per annum payable on delayed
payments under section 75, are prescribed as follows:
Extent of delay Simple interest rate per annum
Up to six months 18%
More than six months &upto one 18% for first six months, and 24% for
year the period of delay beyond six
months
More than one year 18% for first six months, 24% for
second six months, and 30% for the
period of delay beyond one year
This new interest rate regime will become operational only on 1st October
2014. In other words, upto 1st October, 2014, the rate of interest of 18%,
presently applicable, will continue to apply. The variable interest rates will
apply only on or after 1st October, 2014.
As an illustration, assume a case where service tax became due, say, on the
6th of July, 2012 and the assessee pays the dues on 6th of December, 2014.
In such a case, the interest to be charged would be as below:
(i) 18% simple interest upto September, 30th, 2014.
(ii) For the period from 1st October, 2014 to 6th December, 2014, the rate
of interest will be 30% since the period of delay is beyond one year.
As specified in the proviso to section 75, three per cent concession on the
applicable rate of interest will continue to be available to the small service
providers.
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Service Tax Rules, 1994 Pertaining to Transportation Sector
the interest on that tax amount in accordance with the provisions of section
75, a penalty which shall not be less than ` 100 for every day during which
such failure continues or at the rate of 1% of such tax, per month, whichever
is higher, starting with the first day after the due date till the date of actual
payment of the outstanding amount of service tax.
However, the total amount of the penalty payable in terms of this section
shall not exceed 50% of the service tax payable.
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Technical Guide on Transportation
succeeding month or quarter, as the case may be. [Rule 6(4A) of Service Tax
Rules, 1994]
54
Service Tax Rules, 1994 Pertaining to Transportation Sector
(iii) the income-tax audit report, if any, under section 44AB of the Income-
tax Act, 1961 (43 of 1961),
for the scrutiny of the officer or the audit party, or the cost accountant or
chartered accountant, within the time limit specified by the said officer or the
audit party or the cost accountant or chartered accountant, as the case may
be.”
55
Chapter 3
Valuation Rules for Transportation
Sector
Introduction
As per section 66B of the Finance Act, 1994, There shall be levied a tax
(hereinafter referred to as the service tax) at the rate of twelve per cent. on
the value of all services, other than those services specified in the negative
list, provided or agreed to be provided in the taxable territory by one person
to another and collected in such manner as may be prescribed.’
Thus, service tax is on value. Therefore, it is necessary to find out the value
on which service tax will be levied.
Section 67 contains the provision regarding valuation of taxable service for
charging service tax. The section 67 reads as,
‘(1) Subject to the provisions of this Chapter, service tax chargeable on
any taxable service with reference to its value shall,—
(i) in a case where the provision of service is for a consideration in
money, be the gross amount charged by the service provider for
such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not
wholly or partly consisting of money, be such amount in money, with
the addition of service tax charged, is equivalent to the
consideration;
(iii) in a case where the provision of service is for a consideration which
is not ascertainable, be the amount as may be determined in the
prescribed manner.
(2) Where the gross amount charged by a service provider, for the
service provided or to be provided is inclusive of service tax payable, the
value of such taxable service shall be such amount as, with the addition of
tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any
Valuation Rules for Transportation Sector
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Technical Guide on Transportation
58
Valuation Rules for Transportation Sector
taxable service shall be such amount as, with the addition of such tax
payable, is equal to the gross amount charged.
For example if the gross amount charged for provision of service is ` 1500
then the value of taxable service would be ` 1335.00 (1500 x 100/112.36) as
after including the tax payable at ` 1335 @ 12.36% (which works out to `
165.00) the total amount (1335 + 165) comes to ` 1500. [Para 8.1.3
(modified) of Education guide issued by CBEC]
It has also been held in the case of Municipal Corporation of Delhi v. CST
(2010) 25 STT 411 (CESTAT), the appellant has not recovered service tax
separately from the customer. It was held that the value received should be
treated as cum-duty price.
Similarly, it has been held in the case of BholanathOberoi v. CCE (2010) 24
STT 186 (CESTAT SMB) that if the appellant receives less amount that billed
amount, the amount received should be calculated as inclusive of service tax
and service tax should be calculated by treating such amount as cum duty
value.
In under mentioned cases,inter alia, the benefit of cum duty/tax has been
given.
Gyanganga Education Institute Versus Commissioner Of Central
Excise, Rajkot (2012) 7 TMI 502
M/s S. P. Construction & Others Versus CCE, Jaipur-I (2011) 8 TMI
300
CCE, Jaipur-I Versus M/s Daswani Classes (Tri-Delhi) (2008) 11 STR
189
PSL Corrosion Control Services Ltd v. CCE, Daman (2008) 16 STT
320 (Tri-Ahd). This case has been affirmed by Hon’ High Court of
Gujarat (2011) 33 STT 318.
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Technical Guide on Transportation
Rule 5(1) ‘ Where any expenditure or costs are incurred by the service
provider in the course of providing taxable service, all such expenditure or
costs shall be treated as consideration for the taxable service provided or to
be provided and shall be included in the value for the purpose of charging
service tax on the said service. **’
Rule 5(2), ‘Subject to the provisions of sub-rule (1), the expenditure or costs
incurred by the service provider as a pure agent of the recipient of service,
shall be excluded from the value of the taxable service if all the following
conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient of service
when he makes payment to third party for the goods or services
procured;
(ii) the recipient of service receives and uses the goods or services so
procured by the service provider in his capacity as pure agent of the
recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make
payment on his behalf;
(v) the recipient of service knows that the goods and services for which
payment has been made by the service provider shall be provided by
the third party;
(vi) the payment made by the service provider on behalf of the recipient of
service has been separately indicated in the invoice issued by the
service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such
amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third
party as a pure agent of the recipient of service are in addition to the
services he provides on his own account.
Explanation1.-For the purposes of sub- rule (2), "pure agent" means a
person who-
(a) enters into a contractual agreement with the recipient of service to act
as his pure agent to incur expenditure or costs in the course of
providing taxable service;
60
Valuation Rules for Transportation Sector
(b) neither intends to hold nor holds any title to the goods or services so
procured or provided as pure agent of the recipient of service;
(c) does not use such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or
services.
Explanation2.- For the removal of doubts it is clarified that the value of the
taxable service is the total amount of consideration consisting of all
components of the taxable service and it is immaterial that the details of
individual components of the total consideration is indicated separately in the
invoice.
For eg.,
(a) Courier agency also undertakes import and export of cargo and there
is also provision in this regard in the Customs Act, 1962. Whether the
amount collected towards payment of custom duties, concor charges etc be
included in Gross Amount charged and service tax is payable on such
amount?
Ans: The service tax is required to be paid on the gross amount charged
from the client. However, if any amount is collected as a ‘pure agent’, then on
the same, service tax is not required to be paid. When a courier agency
makes payment of custom duty/ concor on behalf of client, it acts in the
capacity of pure agent. Hence, the same will not be covered in the gross
amount charged.
(b) In the course of providing a taxable service, a service provider incurs
costs such as traveling expenses, postage, telephone, etc., and may indicate
these items separately on the invoice issued to the recipient of service. In
such a case, the service provider is not acting as an agent of the recipient of
service but procures such inputs or input service on his own account for
providing the taxable service. Such expenses do not become reimbursable
expenditure merely because they are indicated separately in the invoice
issued by the service provider to the recipient of service. [Illustration 2 to
Rule 5(2) of Service Tax (Determination of Value) Rules, 2006]
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Technical Guide on Transportation
62
Valuation Rules for Transportation Sector
63
Chapter 4
Reverse Charge Mechanism, 2012
forTransportation Sector
Part A
Introduction
Generally it is the service provider who is required to make payment of
service tax. However, there are certain instances wherein it is the service
recipient who is required to make payment of service tax. The provision in
this regard is contained in section 68(2) of the Finance Act, 1994.
As per Rule 2(1)(d)(ii) of the Service Tax Rules, 1994, except the cases
where recipient is required to make the payment of service tax, it is the
service provider who is the person liable to make payment of service tax.
As the entities engaged in transportation sector a part from providing
numerous services, also receives many services. There are certain services
wherein the recipient of service is required to make payment of service tax.
The services wherein the entities would be required to make payment of
service tax has been discussed hereinafter.
Government has also notified Notification No 30/2012-ST whereby the
service tax payable by service provider and service recipient in this regard.
The person liable to make payment of service tax as a recipient of service
w.r.t entities engaged in transportation sector with respect to the services
notified under section 68(2) of the Finance Act, 1994, means
(A) .in relation to service provided or agreed to be provided by an
insurance agent to any person carrying on the insurance business, the
recipient of the service.
(AA). in relation to service provided or agreed to be provided by a recovery
agent to a banking company or a financial institution or a non-banking
financial company, the recipient of the service;
(B) As per Rule 2(1)(d)(i)(B) of Service Tax Rules, 1994, ‘person liable for
paying service taxin relation to service provided or agreed to be
Reverse Charge Mechanism, 2012 forTransportation Sector
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Technical Guide on Transportation
66
Reverse Charge Mechanism, 2012 forTransportation Sector
one of the specified persons; hence, the person liable to pay tax is A Ltd,
recipient of service.
Where the person liable to pay freight is
Not falling in the specified category of persons; or
Is located in a nontaxable territory,
in such case, it is the service provider who has to make payment of service
tax.
In all other cases, it is the service recipient who makes payment of service
tax.
As per Sr No 21 of Notification No 25/2012-ST dated 20.06.2012, ‘there is
exemption for services provided by a goods transport agency, by way of
transport in a goods carriage of,-
(a) agricultural produce;
(b) goods, where gross amount charged for the transportation of goods
on a consignment transported in a single carriage does not exceed
one thousand five hundred rupees;
(c) goods, where gross amount charged for transportation of all such
goods for a single consignee does not exceed rupees seven hundred
fifty;
(d) foodstuff including flours, tea, coffee, jaggery, sugar, milk products,
salt and edible oil, excluding alcoholic beverages;
(e) chemical fertilizer, organic manure and oil cakes;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap; or
(h) defence or military equipments;
(i) cotton, ginned or baled.
With respect to service of transportation of goods by Road, Central
Government has provided an abatement of 75% of the value of services. [Sr
No 7 of the Notification no 26/2012-ST]. Thus, service tax is required to be
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Technical Guide on Transportation
paid only on 25% of the value of services.The abatement has been granted
subject to the condition that CENVAT credit on inputs, capital goods and
input services, used for providing the taxable service, has not been taken by
the service provider under the provisions of the CENVAT Credit Rules, 2004.
Entire service tax after abatement, if any, has to be paid by service receiver,
in case, service receiver is located in a taxable territory and the person
responsible for making payment of freight is in the list of one of the specified
person.
Sponsorship service
The entities engaged in transportation sector may be any entity. The entities
may also sponsor any event. The person liable to pay service tax in relation
to service provided or agreed to be provided by way of sponsorship to
anybody corporate or partnership firm located in the taxable territory, the
recipient of such service;
The entire service tax has to be paid by service recipient of service who is a
body corporate or a partnership firm.
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The term body corporate has the meaning assigned to it in clause (7) of
section 2 of the Companies Act, 1956 (1 of 1956);
As per section 2(7) of the Companies Act, 1956, ‘"body corporate" or
"corporation" includes a company incorporated outside India but does not
include-
(i) a corporation sole;
(ii) a co-operative society registered under any law relating to co-
operative societies; and
(iii) any other body corporate (not being a company as defined in this Act),
which the Central Government may, by notification in the Official
Gazette, specify in this behalf;
After introduction of Companies Act, 2013, the body corporate is defined
under section 2(11) of the said Act which reads as "body corporate" or
"corporation" includes a company incorporated outside India, but does not
include—
(i) a co-operative society registered under any law relating to co-
operative societies; and
(ii) any other body corporate (not being a company as defined in this Act),
which the Central Government may, by notification, specify in this
behalf;
Thus, the provision of partial reverse charge will not apply to a cooperative
society who is a recipient of service, because cooperative society is excluded
from the definition of a body corporate.
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Part B
Point of Taxation for Transportation Sector
Introduction
Point of Taxation Rules, 2011 has been introduced with effect from
01.04.2011. Prior to said date, service tax was required to be paid on receipt
basis for services provided or to be provided.
The purpose of these rules is to introduce clarity and certainty in the matter
of levy and collection of Service Tax particularly in situations of change of
rate of service tax or imposition of service tax on new services. Prior to this,
there was a lack of clarity as to the date from which the changed rate or a
new levy of service tax become payable and tax payers as well as tax
officials face uncertainty in this regard as the provisions are not explicit.
Similar uncertainty prevails in regard to cases of continuous supply of
services. So far these issues have been addressed by CBEC through
clarificatory circulars that accompany such changes. A need has been felt to
put the regulatory frame work on a transparent, clear and durable basis and
hence these rules have been introduced.
In both Central Excise and VAT, tax payment is required on accrual basis –
upon manufacture and clearance of goods in the former and issue of invoice
in the latter. In neither case is the tax payment linked actual receipt of
payment for the goods. The GST regime is likely to follow this practice and it
is necessary to align the service tax regime with it so that transition to GST
will be smooth. The change in the point of payment of tax will also simplify
accounting for the taxpayers.
The point of taxation with respect to the entities engaged in transportation
sector is described below.
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payment
2. April 10, May 25, May 30, 2014 April 10, Invoice not
2014 2014 2014 issued
within 30
days and
payment
received
after
completion
of service
3. April 10, April 30, April 15, 2014 April 15, Invoice
2014 2014 2014 issued in
30 days
but
payment
received
before
invoice
4. April 10, May 25, April 5, 2014 April 5, Invoice not
2014 2014 (part) and 2014 and issued in
May30, 2014 April 10, 30 days.
(remaining) 2014 for Part
respective payment
amounts before
completion,
remaining
later
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the first time during the period between such entry in books of
accounts and its credit in the bank account; and
the credit in the bank account is after four working days from the date
when there is change in effective rate of tax or a service is taxed for
the first time; and
the payment is made by way of an instrument which is credited to a
bank account,
if any rule requires determination of the time or date of payment received, the
expression “date of payment” shall be construed to mean such date on which
the payment is received;
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Gazette under the provisions of the Act, or rules made thereunder [Rule
2(ba) of Point of Taxation Rules, 2011]. Thus, even if the change in
percentage of abatement will constitute “change in effective rate of tax”.
It states that notwithstanding anything contained in rule 3, the point of
taxation in cases where there is a change in effective rate of tax in respect of
a service, shall be determined in the following manner, namely:-
Time of provision of Time of Time of Point of taxation
taxable service issue of receipt of
invoice payment
Taxable service has After the After the Date of payment
been provided before change of change of or issuing of
the change of rate effective rate effective rate invoice, whichever
of tax of tax is earlier;
Before After the Date of issuing
change in change of invoice
effective rate effective rate
of tax of tax
After the Before change Date of Payment
change of in effective
effective rate rate of tax
of tax
Taxable service has Before the After change Date of issuing
been provided after change of in effective Payment
the change in effective rate rate of tax
effective rate of tax of tax
Before the Before change Date of payment
change of in effective or issuing of
effective rate rate of tax invoice, whichever
of tax is earlier;
After change Before the Date of issuing of
in effective change of invoice.
rate of tax effective rate
of tax
For eg., in case of transport of goods by vessel, the abatement was 50% as
per Sr No 10 of Notification No 26/2012-ST subject to condition that credit on
inputs, capital goods and input services, used for providing the taxable
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service, has not been taken under the provisions of the CENVAT Credit
Rules, 2004. Thus, effective rate of tax is 6.18% (12.36% * 50%). From
01.10.2014, the abatement has been increased to 60% meaning thereby tax
is to be paid only on 40% of the value. Thus, effective rate of tax reduces to
4.944%.
In this case, if the service has been provided before 01.10.2014 and invoice
has been issued before 01.10.2014, then the point of taxation will be date of
invoice.
In this case, if the service has been provided before 01.10.2014 and payment
has been received before 01.10.2014, then the point of taxation will be date
of payment.
In this case, if the service has been provided before 01.10.2014 and invoice
and payment has been received after 01.10.2014, then the point of taxation
will be date of invoice or payment, whichever is earlier.
The rate of tax should ideally be the date of provision of service, hence,
where the service has been provided after change in tax i.e., 01.10.2014, but
invoice has been made before change in tax and payment has been received
after change in tax, then the point of taxation will be the date of payment.
Similarly when the service has been provided after change in tax i.e.,
01.10.2014, but payment has been received before change in tax and invoice
has been received after change in tax, then the point of taxation will be the
date of invoice.
In this case, if the service has been provided after 01.10.2014 and invoice
and payment has been received before 01.10.2014, then the point of taxation
will be date of invoice or payment, whichever is earlier.
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81
Chapter 5
Place of Provision of Service Rules,
2012 Pertaining to Transportation
Sector
Introduction
The provisions relating to service tax are contained in Chapter V of Finance
Act, 1994.
The provisions of the Chapter V of Finance Act, 1994 extends to the whole of
India except Jammu and Kashmir. [Section 64(1)]
As per section 66B, ‘There shall be levied a tax (hereinafter referred to as the
service tax) at the rate of twelve per cent on the value of all services, other
than those services specified in the negative list, provided or agreed to be
provided in the taxable territory by one person to another and collected in
such manner as may be prescribed.’ [Section 66B]
As per Rule 2(1)(dd) of Service Tax Rules, 1994, “place of provision” shall be
the place as determined by Place of Provision of Services Rules 2012;
Section 65B(52) interprets "taxable territory" as "taxable territory" means the
territory to which the provisions of this Chapter apply;
Section 65B(35) interprets "non-taxable territory" as "non-taxable territory"
means the territory which is outside the taxable territory;
Thus, from the above, provisions of service tax apply only when the services
are provided in India except Jammu and Kashmir. If the services are
provided outside India, then, provisions of Chapter V of Finance Act, 1994
will not apply.
To determine where the services have been provided, there is place of
Provision of Services Rules, 2012.
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than one location, including a location in the taxable territory, its place
of provision shall be the location in the taxable territory where the
greatest proportion of the service is provided. [Rule 7]
In case of services relating to event, Place of Provision of Service is
where the event (relating to fair, conference, seminar etc) is actually
held [Rule 6]
Place of Provision of services provided directly in relation to an
immovable property, including services provided in this regard by
experts and estate agents, provision of hotel accommodation by a
hotel, inn, guest house, club or campsite, by whatever, name called,
grant of rights to use immovable property, services for carrying out or
co-ordination of construction work, including architects or interior
decorators, shall be the place where the immovable property is located
or intended to be located. [Rule 5]
In case of performance based services (relating to goods), Place of
Provision of Service is where service is actually performed (except
where goods are temporarily imported in India for repairs and are re-
exported subsequently) [Rule 4(a)]. The logic for excluding goods
which are temporarily imported into India for repair is that ultimately, it
will be re-exported and exports are free of taxes.
In case of performance based services (where physical presence of
service receiver or person acting on behalf of recipient of service is
required), Place of Provision of Service is where service is actually
performed [Rule 4(b)]
In all other cases, the place of provision of service shall be location of
service receiver. However, where the location of service receiver is not
available in the ordinary course of business, in such case, place of
provision of service shall be location of service provider. [Rule 3]
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Export of service
As per Rule 6A of the Service Tax Rules, 1994, the provision of any service
provided or agreed to be provided shall be treated as an export of service
when,-
(a) the provider of service is located in the taxable territory ,
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Courier
# Case # 1
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located in India are paying for courier
charges in Indian Rupees.
Ans: In this case, though the parcels are to be delivered outside India and as
per Rule 3of place of provision of Services Rules, 2012, ‘The place of
provision of a service shall be the location of the recipient of service’.
Location of service recipient is in India, therefore, place of provision of
service falls in India
# Case # 2
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located being an exporter makes the
payment from EEFC Account.
Ans: In this case, though the parcels are to be delivered outside India and as
per Rule 3of place of provision of Services Rules, 2012, ‘The place of
provision of a service shall be the location of the recipient of service’.
Location of service recipient is in India, therefore, place of provision of
service falls in India. Even if the payment is received in foreign currency, still
as the location of service recipient is in India, hence, the place of provision of
service falls into taxable territory which is India.
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# Case # 3
The applicant collects parcel from the clients located in India and delivers
them outside of India. The clients located outside India are paying for courier
charges like in case of VPP (Value Payable Post).
Ans: In this case, the parcels are to be delivered outside India and as per
Rule 3of place of provision of Services Rules, 2012, ‘The place of provision
of a service shall be the location of the recipient of service’. Location of
service recipient is in outside India, therefore, place of provision of service
falls outside India.
If the consideration for services is received in convertible foreign exchange,
then the said activity will be considered as Export of Service.
# Case # 4
UPS:United Parcel Service, Inc., located in US generally known as UPS
collects parcels from their clients to be delivered to India. For delivering the
clients, UPS enters into an agreement with Poonam Couriers located in India
for delivering the parcels to the destination based in India. For this, Poonam
Courier charges UPS. What will be the place of provision of this transaction.
Ans: The place of provision of service as per Rule 3 is location of service
recipient which is located in USA. Hence, the place of provision of service is
USA. [This principle has also been held in UPSJetair Express Pvt Ltd V. CCE
(Tri Mumbai) 2014 (10) TMI 523.]
# Case # 5
The applicant collects parcel from the clients located abroad and delivers
them in India. The clients located abroad are paying for courier charges in
convertible foreign exchange.
Ans: In this case, the place of provision of service is located outside India
and will also qualify as export as service provider is located in India as the
service recipient is located outside India, the place of provision of service is
located outside India and amount is received in convertible foreign currency.
For transport of goods by Road
In case of transport of goods service, when the person paying freight
is located in a non-taxable territory, in such a case, the place of provision of
service will be the place of service provider.
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Import of service
The service tax is on services provided in India. As per Rule 2(1)(d)(G) of
Service Tax Rules, 1994, ‘“person liable for paying service tax” in relation
to any taxable service provided or agreed to be provided by any person
which is located in a non-taxable territory and received by any person located
in the taxable territory, the recipient of such service.
As per Sr No 34 of Notification No 25/2012-ST, ‘Services received from a
provider of service located in a non- taxable territory by –
Government, a local authority, a governmental authority or an
individual in relation to any purpose other than commerce, industry or
any other business or profession;
an entity registered under section 12AA of the Income tax Act, 1961
(43 of 1961) for the purposes of providing charitable activities; or
a person located in a non-taxable territory;
is exempt.
For this, let us understand this the taxability w.r.t transportation sector
The place of provision of service for courier shall be location of recipient of
service.
# Case # 1
The UPS, an international courier collects parcel from the clients located
outside in India and delivers them client in India. The clients located in India
are paying for courier charges in Indian Rupees to UPS.
Ans: In this case, the place of provision of service falls in India as per Rule
3of place of provision of Services Rules, 2012. , ‘The place of provision of a
service shall be the location of the recipient of service’. The person liable to
pay tax is the recipient of such service.
# Case # 2
British Airways takes the goods from Britian to India, here the place of
provision of service becomes India.The person located in India has made the
booking of consignment and makes payment to British Airways.
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Ans: In this case, the place of provision of service is India as per Rule 10 as
destination of goods is India. In this case, service provider is located in a
non-taxable territory and received by any person located in the taxable
territory, the recipient of such service is liable to pay tax.
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Chapter 6
CENVAT Credit Rules, 2004
Pertaining to Transportation Sector
Introduction
The transportation sector relating to goods comprises of services provided by
Transport of goods by Road, by Rail, by air, vessel and ocean.
In certain cases, abatement is granted under Notification No 26/2012-ST
dated 20.06.2012 subject to certain conditions. In case of transport of goods
by Road and transport of goods in a vessel, abatement of 75% and 60% has
been granted subject to the condition that CENVAT credit on inputs, capital
goods and input services, used for providing the taxable service, has not
been taken by the service provider under the provisions of the CENVAT
Credit Rules, 2004. Thus, where service provider providing service of
transport of goods by road or in a vessel avails the benefit of abatement,
benefit of CENVAT credit will not be available. In case where the said service
provider wants to avail the benefit of CENVAT credit, he has to forego the
abatement and has to pay service tax at full rate.
In this chapter, the provisions relating to CENVAT credit which has direct or
indirect impact on transportation sector only has been discussed.
duty paid capital goods, inputs and input services. The very first thing is
availment of credit. Credit can be utilised only after availment of the same.
To ‘avail’ means to take credit.
The following credit on duty paid capital goods, inputs and input services can
be availed by a service provider engaged in transportation sector.
Basic Excise duty (Duties as specified in the First Schedule of the
Central Excise Tariff Act, 1985). [Rule 3(1)(i) of CENVAT Credit Rules,
2004]
However, credit shall not be allowed on the goods which avails
benefit of Notification No 1/2011-CE dated 01.03.2011. In this
notification, the duty has been imposed on 130 goods initially at
1%. Now, the same is 2%. The lesser duty is there on the
condition, inter alia, that the CENVAT credit of inputs and input
services shall not be taken. Similarly, the purchaser shall also
not be able to utilise the credit on goods where duty has been
paid at 1% / 2%.
Credit will also not allowed on coal and fertilizers which are
contained in Sr No 67 and 128 in respect of which the benefit of
an exemption under Notification No. 12/2012-CE, dated the
17th March, 2012 is availed. In that also, the rate of duty is 1%.
Credit of service tax leviable under section 66B of the Finance Act,
1994 (w.e.f 01.07.2012, prior to that, credit of service tax paid under
section 66 and 66A were also allowed)
Education cess and Secondary and Higher Secondary Education Cess
on goods and services.
In case of imported goods, the CENVAT credit equivalent to
countervailing duty as contained in section 3 of the Customs Tariff Act,
1975 shall be admissible. However, credit of additional duty of
customs leviable under section 3(5) of the Customs Tariff Act, 1975
shall not be allowed to a service provider.
As the credit of duty paid inputs, capital goods and input services is allowed,
it is necessary to understand the meaning of capital goods, inputs and input
services and conditions on which CENVAT credit can be availed under each
of them has been discussed in below mentioned paragraphs.
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Comments
The provider of service relating to transportation of sector utilizes many
capital goods. For e.g., courier agency and person providing service of
transport of goods by Road services uses the services of truck, any other
goods transport vehicles, the airlines also utilises many capital goods. The
provisions in this regard are explained in the undermentioned paragraphs.
Part (A)(i) of the definition states that the good falling in Chapter 82, Chapter
84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and
parts thereof falling under heading 6804 of the First Schedule to the Tariff
Act, 1985 shall be capital goods. The goods covered in this chapter are
Chapter 82: Tools, implements, cutlery, spoons and forks, of base
metal; parts thereof of base metal
Chapter 84: Nuclear reactors, boilers, machinery and mechanical
appliances; parts thereof
Chapter 85: Electrical machinery and equipment and parts thereof;
sound recorders and reproducers, television image and sound
recorders and reproducers, and parts and accessories of such articles
Chapter 90: Optical, photographic, cinematographic, measuring,
checking, precision, medical or surgical instruments and apparatus;
parts and accessories thereof
Heading 6805: Natural Or Artificial Abrasive Powder Or Grain, On A
Base Of Textile Material, Of Paper, Of Paperboard Or Of Other
Materials, Whether Or Not Cut To Shape Or Sewn Or Otherwise Made
Up
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refractories and refractory materials, moulds and dies and goods falling
under heading 6805, grinding wheels and the like, and parts thereof falling
under heading 6804 of the First Schedule to the Excise Tariff Act, are in the
possession of the provider of output service in such subsequent years,
Example
A service provider received a truck on 16th day of March, 2013 in his
premises. CENVAT of two lakh rupees is paid on this truck. The provider of
output service can take credit upto a maximum of one lakh rupees in the
financial year 2012-13, and the balance in subsequent years i.e., in 14-15 or
any other subsequent year, provided that in the year in which credit is taken,
the goods must be in the possession of service provider.
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excise duty or additional duty of excise u/s 3(5) of the Custom Tariff Act,
1975, then the cost of asset will be reduced to that extent.
Thus, it is upto assessee to select as to whether it wants to claim
depreciation or wants to avail CENVAT credit. Double benefit shall not be
admissible.
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admissible. M/s. Spetech Plant Equipment Pvt. Ltd. v. CCE [2012 (4)
TMI 534] =2013 (289) E.L.T. 348 (Tri. - Ahmd.).
Credit on HSD not admissible. Sangam Spinners Ltd. Versus UOI and
Ors [2011 (3) TMI 4 (SC)] =2011 (266) E.L.T. 145 (SC).
Similarly, credit of any goods such as food items, goods used in a
guesthouse, residential colony, club or a recreation facility and clinical
establishment, when such goods are used primarily for personal use or
consumption of any employee. What is to be noted is that if the same is for
personal consumption of any employee, then its credit is not allowed. When
the same is not for personal consumption of employee, then the credit is
allowed.
Similarly, the input used in construction of works contract of a building or a
civil structure or a part thereof; or for laying of foundation or making of
structures for support of capital goods will not be allowed to an entity
engaged in transportation sector.
Can credit of inputs utilised in manufacture of capital goods be allowed? In
this regard, an instruction from F No F.No.267/11/2010-CX8 dated
08.07.2010 is reproduced for ready reference.
CESTAT Larger Bench in the case of Vandana Global Ltd. V/s CCE,
Raipur [2010-TIOL-624-CESTAT-DEL-LB] delivered on 30.04.10, on
admissibility of credit on capital goods and inputs and to state that the
Tribunal has ruled that 'capital goods' defined in the CENVAT Credit
Rules, in the context of providing credit of duty paid, have to be
excisable goods. Whether a particular plant or structure embedded to
earth can be considered as excisable goods or not has to be
determined in the light of settled decisions of Supreme Court on the
issue. The Tribunal has further ruled that goods like cement and steel
items used for laying 'foundation' and for building 'supporting
structures' cannot be treated as either inputs for capital goods or as
inputs in relation to the final products and therefore, no credit of duty
paid on the same can be allowed under the CENVAT Credit Rules. It
has also been stated by Tribunal that amendment to Explanation 2
to Rule 2(k) of CENVAT Credit Rules, 2004 inserted vide Notification
No. 16/2009-CE (NT) dated 07.07.09, is clarificatory in nature and has
retrospective effect.
Attention is also drawn to the Tribunal's judgement in the case
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of Vikram Cement V/s CCE, Indore [2009 (242) ELT 545 (Tri-Del)],
where the Tribunal held that credit on welding electrodes used for
repair and maintenance, is not available as input. It may also be noted
that in the case of Vikram Cements V/s CCE, Indore [2005 (187) ELT
145 (SC)], it has been conclusively held by the Apex Court that the
definition of capital goods is not inclusive and only the items covered
under the definition and used in the factory of the manufacturer can be
treated as capital goods.
It thus follows from the above judgements that credit on capital goods
is available only on items, which are excisable goods covered under
the definition of 'capital goods' under CENVAT Credit Rules, 2004 and
used in the factory of the manufacturer. As regards 'inputs', they have
to be covered under the definition of 'input' under the CENVAT Credit
Rules, 2004 and used in or integrally connected with the process of
actual manufacture of the final product for admissibility of CENVAT
credit. The credit on inputs used in the manufacture of capital goods,
which are further used in the factory of the manufacturer is also
available, except for items like cement, angles, channels, CTD or TMT
bars and other items used for construction of factory shed, building or
laying of foundation or making of structures for support of capital
goods. Further, credit shall also not be admissible on inputs used for
repair and maintenance of capital goods.
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When the inputs are removed from the premises of provider of output service
as such other than for providing output service, in such a case, the provider
of output service shall pay an amount equal to the credit availed in respect of
such inputs and such removal shall be made under the cover of an invoice
referred to in rule 9 of CENVAT Credit Rules, 2004
If the value of any inputs, on which CENVAT credit has been taken is written
off fully or partially or where any provision to write off fully or partially has
been made in the books of account then the manufacturer or service
provider, as the case may be, shall pay an amount equivalent to the
CENVAT credit taken in respect of the said input or capital goods. However,
when the said inputs is subsequently used in the manufacture of final
products or the provision of output services, the manufacturer or output
service provider, as the case may be, shall be entitled to take the credit of
the amount equivalent to the CENVAT credit paid earlier subject to the other
provisions of these rules. [Rule 3(5B) of CENVAT Credit Rules, 2004].
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The service tax is required to be paid by the service provider on the out put
service as well as by the person who receives service in terms of Notification
No 30/2012-ST dated 20.06.2012. The said notification states the cases
wherein for certain payments, entire service tax is required to be paid by
service provider and certain payments, wherein part of the tax is paid by
service provider as well as part by service recipient.
The credit of service tax on reverse charge can be availed only when the
payment is made to the service provider of the invoice amount as well as the
tax has been paid. The related provision as contained in First Proviso to Rule
4(7) of the CENVAT Credit Rules, 2004 reads as under:
(i) Provide that in case of an input service where the service tax is paid
on reverse charge by the recipient of the service, the CENVAT credit
in respect of such input service shall be allowed on or after the day on
which payment is made of the value of input service and the service
tax paid or payable as indicated in invoice, bill or, as the case may be,
challan referred to in rule 9:
The said proviso has been amended w.e.f 11.07.2014 and the amended
Proviso reads as under:
(i) Provided that in respect of input service where whole of the service tax
is liable to be paid by the recipient of service, credit shall be allowed
after the service tax is paid.
(ii) Provided further that in respect of an input service, where the service
recipient is liable to pay a part of service tax and the service provider
is liable to pay the remaining part, the CENVAT credit in respect of
such input service shall be allowed on or after the day on which
payment is made of the value of input service and the service tax paid
or payable as indicated in invoice, bill or, as the case may be, challan
referred to in rule 9
The effect of the above is that where whole of the service tax is liable to be
paid by the recipient of service, credit shall be allowed after the service tax is
paid. For E.g., A Ltd made import payment of ` 10,00,000/- on which service
tax under reverse charge is required to be paid of ` 112360/-. Earlier, the
credit could be allowed only when the import payment as well as tax, both
the amount has been paid. Now, after above amendment, the credit can be
taken the moment payment of tax has been made.
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Thus, there can be situation where a supplier is giving a higher credit, say of
nine months. Rule 7 of point of taxation says that the point of taxation in
respect of the persons required to pay tax as recipients of service under the
rules made in this regard in respect of services notified under sub-section (2)
of section 68 of the Act, shall be the date on which payment is made and
further it states that when the payment is not made within six months, the
point of taxation shall be determined as if this rule does not exist. Thus, it will
be fine if the service tax is paid within six months and payment to service
provider as per the terms of agreement. In such case, the credit of service
tax can be availed after making payment of service tax. However, it is to be
noted that this provision applies only when whole of the service tax is to be
paid by recipient of service. Thus, it do not apply when part of the service tax
is payable by provider and part by service recipient of service.
With respect to the service tax which is required to be paid by service
provider as well as service receiver, in such case, the CENVAT credit in
respect of such input service shall be allowed on or after the day on which
payment is made of the value of input service and the service tax paid or
payable as indicated in invoice, bill or, as the case may be, challan referred
to in rule 9. Thus, what it wants to convey is that with respect to service tax
under reverse charge, the tax credit can be obtained once the payment of tax
is made and also, the amount is paid to the service provider.
Where in case the payment of the value of input service and the service tax
paid or payable as indicated in the invoice, bill or, as the case may be,
challan referred to in rule 9, except in respect of input service where the
whole of the service tax is liable to be paid by the recipient of service, is not
made within three months of the date of the invoice, bill or, as the case may
be, challan, the manufacturer or the service provider who has taken credit on
such input service, shall pay an amount equal to the CENVAT credit availed
on such input service and in case the said payment is made, the
manufacturer or output service provider, as the case may be, shall be entitled
to take the credit of the amount equivalent to the CENVAT credit paid earlier
subject to the other provisions of these rules.
The above point is further strengthened by substituting second proviso to
Rule 4(7) which, before its substitution, reads as under:
Provided further that in case the payment of the value of input
service and the service tax paid or payable as indicated in the invoice,
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bill or, as the case may be, challan referred to in rule 9, is not made
within three months of the date of the invoice, bill or, as the case may
be, challan, the manufacturer or the service provider who has taken
credit on such input service, shall pay an amount equal to the
CENVAT credit availed on such input service and in case the said
payment is made, the manufacturer or output service provider, as the
case may be, shall be entitled to take the credit of the amount
equivalent to the CENVAT credit paid earlier subject to the other
provisions of these rules:
The Amended proviso reads as under:
Provided also that in case the payment of the value of input service
and the service tax paid or payable as indicated in the invoice, bill or,
as the case may be, challan referred to in rule 9, except in respect of
input service where the whole of the service tax is liable to be paid by
the recipient of service, is not made within three months of the date of
the invoice, bill or, as the case may be, challan, the manufacturer or
the service provider who has taken credit on such input service, shall
pay an amount equal to the CENVAT credit availed on such input
service and in case the said payment is made, the manufacturer or
output service provider, as the case may be, shall be entitled to take
the credit of the amount equivalent to the CENVAT credit paid earlier
subject to the other provisions of these rules.
Where if any payment or part thereof, made towards an input service is
refunded or a credit note is received by the manufacturer or the service
provider who has taken credit on such input service, he shall pay an amount
equal to the CENVAT credit availed in respect of the amount so refunded or
credited.
The manufacturer or the provider of output service shall not take CENVAT
credit after six months of the date of issue of any of the documents specified
in sub-rule (1) of rule 9.
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(i) 3rd proviso to Rule 4(7) of CCR, 2004 prescribes that if the payment of
value of input service and service tax payable is not made within three
months of date of invoice, bill or challan, then the CENVAT Credit
availed is required to be paid back by the manufacturer or service
provider. Subsequently, when such payment of value of input service
and service tax is made, the amount so paid back can be re-credited.
(ii) According to Rule 3(5B) of CCR, 2004, if the value of any input or
capital goods before being put to use on which CENVAT Credit has
been taken, is written off or such provisions made in Books of
Account, the manufacturer or service provider is required to pay an
amount equal to credit so taken. However, when the inputs or capital
goods are subsequently used, the amount so paid can be re-credited
in the account.
(iii) Rule 4(5)(a) of CCR, 2004 prescribes that in case inputs sent to job
worker are not received back within 180 days, the manufacturer or
service provider is required to pay an amount equal to credit taken on
such inputs in the first instance. However, when the inputs are
subsequently received back from job worker, the amount so paid can
be re-credited in the account.
To this, Ministry has clarified that the purpose of the amendment made
by Notification No. 21/2014-CE (NT) dated 11.07.2014 is to ensure that after
the issue of a document undersub-rule (1) of Rule 9, credit is taken for the
first time within six months of the issue of the document. Once this condition
is met, the limitation has no further application. It is, therefore, clarified that
in each of the three situations described above pertaining to Rule 4(7), Rule
3(5B)or Rule 4(5) (a) of CCR, 2004, the limitation of six months would apply
when the credit is taken for the first time on an eligible document. It would
not apply for taking re-credit of amount reversed, after meeting the conditions
prescribed in these rules.
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The common input service relates to units ‘A’, ‘B’ and ‘C’, the distribution will
be as under:
(i) Distribution to ‘A’ =12000 * 2500000/ 10000000
= 3000
(ii) Distribution to ‘B’ =12000 * 3000000/ 10000000
= 3600
(iii) Distribution to ‘C’ = 12000 * 1500000/10000000
= 1800
(iv) Distribution to ‘D’ = 12000 * 3000000/ 10000000
= 3600
The distribution for the purpose of rule 7(d), will be done in this ratio in all
cases, irrespective of whether such common input services were used in all
the units or in some of the units. [From Circular No 178/4/2014-ST dated
11.07.2014]
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CENVAT credit, if any, lying in his credit, the balance, if any, still
remaining shall lapse and shall not be allowed to be utilized for
payment of duty on any other final product whether cleared for home
consumption or for export, or for payment of service tax on any output
service, whether provided in India or exported. [Rule 11(3) of CCR’04]
A provider of output service shall be required to pay an amount equivalent to
the CENVAT credit, if any, taken by him in respect of inputs received for
providing the said service and is lying in stock or is contained in the taxable
service pending to be provided, when he opts for exemption from payment of
whole of the service tax leviable on such taxable service under a notification
issued under section 93 of the Finance Act, 1994(32 of 1994) and after
deducting the said amount from the balance of CENVAT credit, if any, lying
in his credit, the balance, if any, still remaining shall lapse and shall not be
allowed to be utilized for payment of duty on any excisable goods, whether
cleared for home consumption or for export or for payment of service tax on
any other output service, whether provided in India or exported. [Rule 11(4)
of CCR’04]
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In this, if any part of the value of a taxable service has been exempted
on the condition that no CENVAT credit of inputs and input services,
used for providing such taxable service, shall be taken then the
amount specified in this clause shall be 6% / 2% of the value so
exempted.
if any duty of excise is paid on the exempted goods, the same shall be
reduced from the amount payable under this clause.
(ii) pay an amount as determined under sub-rule (3A); (i.e., proportionate
credit)
(iii) Maintain separate account with respect to inputs and credit of inputs
shall be taken only to the extent they are utilized in manufacture of dutiable
goods and provision of taxable service and with respect to input services,
only proportionate credit has to be availed as per Rule 6(3A) of CENVAT
Credit Rules, 2004.
If the manufacturer of goods or the provider of output service, avails any of
the option stated above, he shall exercise such option for all exempted goods
manufactured by him or, as the case may be, all exempted services provided
by him, and such option shall not be withdrawn during the remaining part of
the financial year.
Payment of an amount under Rule 6(3) shall be deemed to be CENVAT
credit not taken for the purpose of an exemption notification wherein any
exemption is granted on the condition that no CENVAT credit of inputs and
input services shall be taken. [Rule 6(3D) of CCR’04]
Rule 6(3A) states that the credit shall be taken only in proportion of turnover
of dutiable goods and taxable services to the total turnover.
For determination and payment of amount payable under clause (ii) of sub-
rule (3), the manufacturer of goods or the provider of output service shall
follow the following procedure and conditions, namely:-
(iv) while exercising this option, the manufacturer of goods or the provider
of output service shall intimate in writing to the Superintendent of Central
Excise giving the following particulars, namely:-
name, address and registration No. of the manufacturer of goods or
provider of output service;
date from which the option under this clause is exercised or proposed
to be exercised;
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within a period of fifteen days from the date of payment or adjustment, the
following particulars, namely:-
(i) details of CENVAT credit attributable to exempted goods and
exempted services, monthwise, for the whole financial year,
determined provisionally.
(ii) CENVAT credit attributable to exempted goods and exempted services
for the whole financial year (on actual basis)
(iii) Where the amount debited provisionally is less than the amount which
should have been debited, then the date of amount short paid.
(iv) interest payable and paid, if any, on the amount short-paid
(v) At the end of the year, where the amount debited provisionally is more
than the amount which should have been debited, then credit taken on
account of excess payment, if any.
Where the amount equivalent to CENVAT credit attributable to exempted
goods or exempted services cannot be determined provisionally, due to
reasons that no dutiable goods were manufactured and no output service
was provided in the preceding financial year, then the manufacturer of goods
or the provider of output service is not required to determine and pay such
amount provisionally for each month, but shall determine the CENVAT credit
attributable to exempted goods or exempted services for the whole year and
pay the amount so calculated on or before 30thJune of the succeeding
financial year in case of late payment, along with interest at 24% p.a.
(g) The “Value” for the purpose of sub-rules (3) and (3A),—
(i) shall have the same meaning as assigned to it under section 67 of the
Finance Act, read with rules made thereunder or, as the case may be,
the value determined under section 3, 4 or 4A of the Excise Act, read
with rules made thereunder;
(ii) in the case of a taxable service, when the option available under sub-
rules (7),(7A),(7B) or (7C) of rule 6 of the Service Tax Rules,
1994, has been availed, shall be the value on which the rate of service
tax under section 66B of the Finance Act, read with an exemption
notification, if any, relating to such rate, when applied for calculation of
service tax results in the same amount of tax as calculated under the
option availed; or
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(iii) in case of trading, shall be the difference between the sale price and
the cost of goods sold (determined as per the generally accepted
accounting principles without including the expenses incurred towards
their purchase) or ten per cent of the cost of goods sold, whichever is
more.
(iv) in case of trading of securities, shall be the difference between the
sale price and the purchase price of the securities traded or one per
cent. of the purchase price of the securities traded, whichever is more.
(v) shall not include the value of services by way of extending deposits,
loans or advances in so far as the consideration is represented by way
of interest or discount;
(h) The amount mentioned in sub-rules (3), (3A) unless specified
otherwise, shall be paid by the manufacturer of goods or the provider of
output service by debiting the CENVAT credit or otherwise on or before the
5th day of the following month except for the month of March, when such
payment shall be made on or before the 31st day of the month of March.
(i) If the manufacturer of goods or the provider of output service fails to
pay the amount payable under sub-rule (3), (3A), it shall be recovered, in the
manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.
(j) In case of a manufacturer who avails the exemption under a
notification based on the value of clearances in a financial year and a service
provider who is an individual or proprietary firm or partnership firm, the
expressions, “following month” and “month of March” occurring in sub-rules
(3) and (3A) shall be read respectively as “following quarter” and “quarter
ending with the month of March.
Clarifications- Circular No. 868/6/2008-CX dated 09.05.2008
Whether an assessee availing option (i) or option (ii) under rule 6(3) is
allowed to take CENVAT Credit of duty paid on inputs and input
services which are used for both dutiable and exempted goods or
services.
Yes, credit on such inputs and input services is allowed. However, an
assessee following option (i) or (ii) under rule 6(3) shall not be allowed
to take CENVAT credit of duty paid on those inputs and input services
which are used exclusively for the manufacture of exempted goods or
provision of exempted services [refer Explanation II of rule 6(3)].
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(ii) an importer;
(iii) an importer from his depot or from the premises of the consignment
agent of the said importer if the said depot or the premises, as the
case may be, is registered in terms of the provisions of Central Excise
Rules, 2002;
(iv) a first stage dealer or a second stage dealer, as the case may be, in
terms of the provisions of Central Excise Rules, 2002; or
(b) a supplementary invoice, issued by a manufacturer or importer of
inputs or capital goods in terms of the provisions of Central Excise Rules,
2002 from his factory or depot or from the premises of the consignment
agent of the said manufacturer or importer or from any other premises from
where the goods are sold by, or on behalf of, the said manufacturer or
importer, in case additional amount of excise duties or additional duty
leviable under section 3 of the Customs Tariff Act, has been paid, except
where the additional amount of duty became recoverable from the
manufacturer or importer of inputs or capital goods on account of any non-
levy or short-levy by reason of fraud, collusion or any wilful misstatement or
suppression of facts or contravention of any provisions of the Excise Act, or
of the Customs Act, 1962 (52 of 1962) or the rules made there under with
intent to evade payment of duty.
Explanation.- For removal of doubts, it is clarified that supplementary
invoice shall also include challan or any other similar document evidencing
payment of additional amount of additional duty leviable under section 3 of
the Customs Tariff Act; or
bb. a supplementary invoice, bill or challan issued by a provider of output
service, in terms of the provisions of Service Tax Rules, 1994 except where
the additional amount of tax became recoverable from the provider of service
on account of non-levy or non-payment or short-levy or short-payment by
reason of fraud or collusion or wilful mis-statement or suppression of facts or
contravention of any of the provisions of the Finance Act or of the rules made
thereunder with the intent to evade payment of service tax.
(c) a bill of entry; or
(d) a certificate issued by an appraiser of customs in respect of goods
imported through a Foreign Post Office; or
(e) a challan evidencing payment of service tax, by the service recipient
as the person liable to pay service tax; or
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proprietor or Hindu Undivided Family, as the case may be, shall also
be mentioned in the invoice.
As per Rule 4A of service tax Rules, 1994, the invoice shall contain
the following, namely:-
the name, address and the registration number of such person;
the name and address of the person receiving taxable service;
description and value of taxable service provided or agreed to
be provided; and
the service tax payable thereon.
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Penal Provisions
5. If any person, takes or utilises CENVAT credit in respect of input or
capital goods or input services, wrongly or in contravention of any of the
provisions of these rules, then, all such goods shall be liable to confiscation
and such person, shall be liable to a penalty not exceeding the duty or
service tax on such goods or services, as the case may be, or two thousand
rupees, whichever is greater. [Rule 15(1) of CCR’04]
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136
Chapter 7
Notification and Circular Pertaining to
Transportation Sector
PART-I: NOTIFICATIONS
[A]
Small Scale Exemption Notification
Notification No 33/2012-ST dt. 20.06.2012
--------------------------------------------------------------------
Gist of Notification No 33/2012-ST
The service provider is not required to make payment of service tax from the
very first invoice / receipt. The service provider can claim exemption from
payment of service tax upto aggregate value of taxable services provided of
` 10 lakhs provided, inter alia,
The value of taxable services provided in the previous year do not
exceed ` 10 lakhs;
It should not be under brand name or trade name of any other person;
The exemption notification will not apply for the services wherein a
person is required to make payment of service tax under reverse
charge mechanism.
The detailed notification is reproduced below:
Notification - Service Tax - Service Tax
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 33/2012 - Service Tax
New Delhi, the 20th June, 2012
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Notification and Circular Pertaining to Transportation Sector
(iv) the provider of taxable service shall avail the CENVAT credit only on
such inputs or input services received, on or after the date on which
the service provider starts paying service tax, and used for the
provision of taxable services for which service tax is payable;
(v) the provider of taxable service who starts availing exemption under
this notification shall be required to pay an amount equivalent to the
CENVAT credit taken by him, if any, in respect of such inputs lying in
stock or in process on the date on which the provider of taxable
service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the
taxable service provider after deducting the amount referred to in
sub-paragraph (v), if any, shall not be utilised in terms of provision
under sub-rule (4) of rule 3 of the said rules and shall lapse on the
day such service provider starts availing the exemption under this
notification;
(vii) where a taxable service provider provides one or more taxable
services from one or more premises, the exemption under this
notification shall apply to the aggregate value of all such taxable
services and from all such premises and not separately for each
premises or each services; and
(viii) the aggregate value of taxable services rendered by a provider of
taxable service from one or more premises, does not exceed ten
lakh rupees in the preceding financial year.
3. For the purposes of determining aggregate value not exceeding ten
lakh rupees, to avail exemption under this notification, in relation to taxable
service provided by a goods transport agency, the payment received
towards the gross amount charged by such goods transport agency under
section 67 of the said Finance Act for which the person liable for paying
service tax is as specified under sub-section (2) of section 68 of the said
Finance Act read with Service Tax Rules, 1994, shall not be taken into
account.
Explanation. For the purposes of this notification,-
(A) “brand name” or “trade name” means a brand name or a trade name,
whether registered or not, that is to say, a name or a mark, such as
symbol, monogram, logo, label, signature, or invented word or writing which
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[B]
Mega Exemption Notification for Transportation of Goods
Notification No 25/2012-STdt. 20.06.2012
--------------------------------------------------------------------
Gist of Notification No 25/2012-ST
Government has introduced mega exemption Notification No 25/2012-ST
dated 20.06.2012. This notification grants exemption to either service
provider or service recipient when the same performs any of the specified
activity.
As far as transportation sector is concerned, undermentioned is the summary
of the exemptions applicable to the said sector.
Sr No 1: It exempts the services when provided to the United Nations
or a specified international organization
Sr No 6: Transport sector may also be in need of legal services or
arbitral tribunal. As per Notification No 30/2012-ST, the recipient of
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Notification and Circular Pertaining to Transportation Sector
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Notification and Circular Pertaining to Transportation Sector
(RajkumarDigvijay)
Under Secretary to the Government of India
[C]
Mega Exemption Notification for Transportation of Goods
Notification No 27/2012-STdt. 20.06.2012
--------------------------------------------------------------------
Gist of Notification No 27/2012-ST
When the services are provided any person for the official use of a foreign
diplomatic mission or consular post in India, or for personal use or for the use
of the family members of diplomatic agents or career consular officers posted
therein, then the service tax is exempted. Thus, services of transportation of
goods when provided for the official use of a foreign diplomatic mission or
consular post in India, or for personal use or for the use of the family
members of diplomatic agents or career consular officers posted therein is
exempted.
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(RajkumarDigvijay)
Under Secretary to the Government of India
[D]
Notification relating to abatement
Notification No 26/2012-ST
--------------------------------------------------------------------
Gist of Notification No 26/2012-ST
This notification prescribes abatement on the gross amount charged
towards services and conditions thereto. Prior to this, the provisions were
contained in Notification No 1/2006-ST. The relevant portion related to
transportation sector as contained in Notification No 26/2012-ST is
reproduced below for ready reference:
Notification - Service Tax - Service Tax
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3. This notification shall come into force on the 1st day of July, 2012.
[F.No. 334 /1/ 2012-TRU]
(Rajkumar Digvijay)
Under Secretary to the Government of India
[E]
Notification relating to reverse charge
Notification No 30/2012-STdt. 20.06.2012
--------------------------------------------------------------------
Gist of Notification No 30/2012-ST
Generally, it is the service provider who is required to make payment of
service tax. However, with respect to certain services, it is the service
recipient who is required to make payment of service tax.
The provisions in this regard are contained in Notification No 30/2012-ST
which is reproduced below for ready reference.
Notification - Service Tax - Service Tax
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provided or agreed to be
provided by an arbitral
tribunal
5 in respect of services Nil 100%
provided or agreed to be
provided by individual
advocate or a firm of
advocates by way of legal
services
3[5A 10[in respect of services Nil 100%]
provided or agreed to be
provided by a director of a
company or a body
corporate to the said
company or the body
corporate]
6 in respect of services Nil 100%
provided or agreed to be
provided by Government
or local authority by way
of support services
excluding,- (1) renting of
immovable property, and
(2) services specified
in sub-clauses (i), (ii) and
(iii) of clause (a) of
section 66D of
the Finance Act,1994
7 (a) in respect of services Nil 100 %
provided or agreed to be
provided by way of 11[50%] 12[50%]
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2. This notification shall come into force on the 1st day of July, 2012.
[F.No. 334/1/2012- TRU]
(Raj Kumar Digvijay)
Under Secretary to the Government of India
[F]
Notification relating to Input stage rebate in case of export of services
Notification No 39/2012-ST dt. 20.06.2012
Gist of Notification No 39/2012-ST
What is to be exported is goods and services and not taxes thereon. In case
of export of services, many inputs as well as input services are utilised. The
Government grants rebate of duty paid on inputs and input services utilized
in providing export services. The procedure in this regard is contained in
Notification No 39/2012-ST which is reproduced below:
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(b) description, value and the amount of service tax and cess payable
on input services actually required to be used in providing service to
be exported.
3.2 Verification of declaration. The Assistant Commissioner of Central
Excise or the Deputy Commissioner of Central Excise, as the case may be,
shall verify the correctness of the declaration filed prior to such export of
service, if necessary, by calling for any relevant information or samples of
inputs and if after such verification, the Assistant Commissioner of Central
Excise or the Deputy Commissioner of Central Excise is satisfied that there
is no likelihood of evasion of duty, or as the case may be, service tax and
cess, he may accept the declaration.
3.3 Procurement of input materials and receipt of input services.-
The provider of service to be exported shall,-
(i) obtain the inputs required for use in providing service to be exported,
directly from a registered factory or from a dealer registered for the
purposes of the CENVAT Credit Rules, 2004 accompanied by
invoices issued under the Central Excise Rules, 2002;
(ii) receive the input services required for use in providing service to be
exported and an invoice, a bill or, as the case may be, a challan
issued under the provisions of Service Tax Rules, 1994.
3.4 Presentation of claim for rebate.
a.
(i) claim of rebate of the duty paid on the inputs or the service tax and
cess paid on input services shall be filed with the jurisdictional
Assistant Commissioner of Central Excise or Deputy Commissioner
of Central Excise, as the case may be, after the service has been
exported;
(ii) such application shall be accompanied by, –
(a) invoices for inputs issued under the Central Excise Rules,
2002 and invoice, a bill, or as the case may be, a challan for
input services issued under the Service Tax Rules, 1994, in
respect of which rebate is claimed;
(b) documentary evidence of receipt of payment against service
exported, payment of duty on inputs and service tax and cess
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[G]
Notification relating to rebate of services utilised for export goods
received beyond the place of removal
Notification No 41/2012-ST dt. 20.06.2012
Gist of Notification No 41/2012-ST
The exporter receives many services like transport of goods, transport of
goods by rail, insurance, etc for export of goods beyond the place of
removal.
Government through this notification grants rebate of the services. There are
two procedures for filing a rebate claim. Assessee can claim either based
onpara 2 or para 3 of Notification. The rebate under para 3 can be claimed
only when the difference between amount of rebate as per para 2 and as per
para 3 exceeds 20%. The detailed notification is reproduced below:
Notification - Service Tax - Service Tax
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
NOTIFICATION NO
41/2012-ST, Dated: June 29, 2012
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(g) the claim for rebate of service tax paid on the specified services
used for export of goods shall be filed within one year from the date of
export of the said goods.
Explanation .- For the purposes of this clause the date of export shall be
the date on which the proper officer of Customs makes an order permitting
clearance and loading of the said goods for exportation undersection 51 of
the Customs Act, 1962 (52 of 1962);
(h) where the total amount of rebate sought under a claim is upto 0.50% of
the total FOB value of export goods and the exporter is registered with the
Export Promotion Council sponsored by Ministry of Commerce or Ministry
of Textiles, Form A-1 shall be submitted along with relevant invoice, bill or
challan, or any other document for each specified service, in original,
issued in the name of the exporter, evidencing payment for the specified
service used for export of the said goods and the service tax paid thereon,
certified in the manner specified in sub-clauses (A) and (B):
(A) if the exporter is a proprietorship concern or partnership firm, the
documents enclosed with the claim shall be self-certified by the
exporter and if the exporter is a limited company, the documents
enclosed with the claim shall be certified by the person authorised by
the Board of Directors;
(B) the documents enclosed with the claim shall also contain a certificate
from the exporter or the person authorised by the Board of Directors,
to the effect that specified service to which the document pertains
has been received, the service tax payable thereon has been paid
and the specified service has been used for export of the said goods
under the shipping bill number;
(i) where the total amount of rebate sought under a claim is more than
0.50% of the total FOB value of the goods exported, the procedure
specified in clause (h) above shall stand modified to the extent that the
certification prescribed thereon, in sub- clauses (A) and (B) shall be made
by the Chartered Accountant who audits the annual accounts of the
exporter for the purposes of the Companies Act, 1956 (1 of 1956) or
the Income Tax Act, 1961(43 of 1961), as the case may be;
(j) where the rebate involved in a claim is less than rupees five
hundred, the same shall not be allowed;
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[H]
Notification relating to exemption of services of transport of goods by
exporter of goods
Notification No 31/2012-ST dt. 20.06.2012
Gist of Notification No 31/2012-ST
In case of export goods, the rebate of goods and services utilised in export
goods is eligible. However, there are certain services wherein Government
has granted upfront exemption from payment of service tax. The upfront
exemption has been granted so as to avoid chain of first of all payment of tax
and then grant of refund.
The provisions in this regard are contained are contained in Notification No
31/2012-ST dated 20.06.2012. As per the said provision, ‘Service provided to
an exporter for transport of the said goods by goods transport agency in a
goods carriage from any container freight station or inland container depot to
the port or airport, as the case may be, from where the goods are exported;
or Service provided to an exporter in relation to transport of the said goods
by goods transport agency in a goods carriage directly from their place of
removal, to an inland container depot, a container freight station, a port or
airport, as the case may be, from where the goods are exported is exempt
from the payment of service tax.’
The detailed notification is reproduced below:
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[I]
Notification relating to exemption of services provided in Special
Economic Zone
Notification No 12/2013-ST dt. 01.07.2013
Gist of Notification No 12/2013-ST
The provisions of Chapter V of Finance Act, 1994 applies when the services
are provided in a taxable territory.
As per Rule 31 of Special Economic Zones Rules, 2006, there is exemption
from payment of service tax on taxable services under section 65 of the
Finance Act, 1994 (32 of 1994) rendered to a Developer or a Unit (including
a Unit under construction) by any service provider shall be available for the
authorized operations in a Special Economic Zone. The SEZ Act has
overriding effect over any of the provisions of the Act for the time being in
force.
For the said purpose, notification has been issued from time to time for
granting upfront exemption to a service provider who provides services in
SEZ or by way of refund to a unit located in SEZ’. The provisions at present
are contained in Notification No 12/2013-ST and are reproduced for a ready
reference.
Notification - Service Tax - Service Tax
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY,
PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 12 / 2013-Service Tax
New Delhi, the 1st July, 2013
G.S.R.448(E).–In exercise of the powers conferred by sub-section (1) of
section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as
the said Act) read with sub-section 3 of section 95 of Finance (No.2), Act,
2004 (23 of 2004) and sub-section 3 of section 140 of the Finance Act,
2007 (22 of 2007) and in supersession of the notification of the
Government of India in the Ministry of Finance (Department of Revenue),
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Notification and Circular Pertaining to Transportation Sector
No. 40/2012-Service Tax, dated the 20th June, 2012, published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide
number G.S.R. 482 (E), dated the 20th June, 2012, except as respects
things done or omitted to be done before such supersession, the Central
Government, on being satisfied that it is necessary in the public interest so
to do, hereby exempts the services on which service tax is leviable
under section 66B of the said Act, received by a unit located in a Special
Economic Zone (hereinafter referred to as SEZ Unit) or Developer of SEZ (
hereinafter referred to as the Developer) and used for the authorised
operation from the whole of the service tax, education cess, and secondary
and higher education cess leviable thereon.
2. The exemption shall be provided by way of refund of service tax paid
on the specified services received by the SEZ Unit or the Developer and
used for the authorised operations:
Provided that where the specified services received by the SEZ Unit or the
Developer are used exclusively for the authorised operations, the person
liable to pay service tax has the option not to pay the service tax ab initio,
subject to the conditions and procedure as stated below.
3. This exemption shall be given effect to in the following manner:
(I) The SEZ Unit or the Developer shall get an approval by the Approval
Committee of the list of the services as are required for the authorised
operations (referred to as the ‘specified services’ elsewhere in the
notification) on which the SEZ Unit or Developer wish to claim exemption
from service tax.
(II) The ab-initio exemption on the specified services received by the
SEZ Unit or the Developer and used exclusively for the authorised
operation shall be allowed subject to the following procedure and
conditions, namely:-
(a) the SEZ Unit or the Developer shall furnish a declaration in Form A-
1, verified by the Specified Officer of the SEZ, along with the list of
specified services in terms of condition (I);
(b) on the basis of declaration made in Form A-1, an authorisation shall
be issued by the jurisdictional Deputy Commissioner of Central Excise or
Assistant Commissioner of Central Excise, as the case may be to the SEZ
Unit or the Developer, in Form A-2 2[within fifteen working days from the
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or SEZ Unit to the registered service provider or such extended period as the
Assistant Commissioner of Central Excise or the Deputy Commissioner of
Central Excise, as the case may be, shall permit;
(f) the SEZ Unit or the Developer shall submit only one claim of refund
under this notification for every quarter:
Explanation.- For the purposes of this notification “quarter” means a period of
three consecutive months with the first quarter beginning from 1st April of
every year, second quarter from 1st July, third quarter from 1st October and
fourth quarter from 1st January of every year.
(g) the SEZ Unit or the Developer who is not so registered under the
provisions referred to in clause (c), shall, before filing a claim for refund
under this notification, make an application for registration under rule 4 of
theService Tax Rules, 1994.
(h) if there are more than one SEZ Unit registered under a common service
tax registration, a common refund may be filed at the option of the assessee.
(IV) The SEZ Unit or Developer, who intends to avail exemption or refund
under this notification, shall maintain proper account of receipt and use of the
specified services, on which exemption or refund is claimed, for authorised
operations in the SEZ.
4. Where any sum of service tax paid on specified services is
erroneously refunded for any reason whatsoever, such service tax refunded
shall be recoverable under the provisions of the said Act and the rules made
there under, as if it is recovery of service tax erroneously refunded;
5. Notwithstanding anything contained in this notification, SEZ Unit or the
Developer shall have the option not to avail of this exemption and instead
take CENVAT credit on the specified services in accordance with
theCENVAT Credit Rules, 2004.
6. Words and expressions used in this notification and defined in
the Special Economic Zones Act, 2005 (28 of 2005) or the rules made
thereunder, or the said Act, or the rules made there under shall apply, so far
as may be, in relation to refund of service tax under this notification as they
apply in relation to a SEZ.
7. This notification shall come into force on the date of its publication in
the Gazette of India
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174
Notification and Circular Pertaining to Transportation Sector
No- TCR/1078/2011/2
New Delhi, 28.09.2012
The General Managers,
All Indian Railways,
Sub : Levy of Service Tax on Transportation of Goods by Rail
Ref : Ministry of Finance Gazette Notification No I of 2006 dated I* March
2006 followed by Gazette Notification No.
(i) 20 of 2006 dated 25th April 2006;
(ii) 28 & 29 of 2009 dated 31st August 2009
(iii) 33 & 34 of 2009 dated 1st September 2009:
(iv) 8 & 9 of 2010 dated 27th February 2010
(v) 20,21 & 22 of 2010 dated 30th March 2010;
(vi) 33,34 & 35 of 2010 dated 22nd June 2010;
(vii) 56 of 2010 dated 21st December 2010
(viii) 20 of 2011 dated 30th March 2011; and
(ix) 38,39 & 40 of 2011 dated 14th June 2011;
(x) 7,8 & 9 of 2012 dated 17th March 2012;
(xi) 25 of 2012 dated 20th June 2012; and
(xii) 43 of 2012 dated 2nd July 2012.
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General: As per the Finance Bill 2010 and subsequent Gazette notification
No. 43 of 2012 on the subject, "Service Tax on service provided in relation to
transport of goods by rail ' will come into effect from 01 10.2012. "
In supersession of Rates Circular No.27 of 2012, the following guidelines are
issued for levy of Service Tax on Transportation of goods by Rail.
In compliance of the provisions contained in Finance Bill, 2010 and
subsequent notifications issued by Finance Ministry as referred to above,
following instructions are issued.
1.Certain commodities have been exempted from payment of service tax as
per Ministry of Finance notification No. 25 of 2012 dated 20* June 2012. List
of commodities, which have been exempted from levy of Service Tax, is
enclosed as Annexure-l.
2.As on date Service Tax is levied at the following rates.
Service Tax 12%.
Education Cess of 2% on Service Tax,
Higher Education Cess of 1% on Service Tax.
3. Since an abatement of 70% has been permitted on freight for the taxable
commodities, vide Notification No. 26 of 2012 Service Tax dated 20.06.2012;
Service Tax will be charged on 30% of tot=J freight inclusive of all charges
on goods which should be calculated as follows
(i) Service Tax of 12% will be charged on 30% of freight (equivalent to
3.6% on the total freight);
(ii) Education Cess of 2% on Service Tax will be added (equivalent to
0.072% on total freight); and
(iii) Higher Education Cess of 1% on Service Tax will also be added
(equivalent to 0,036% on total freight);
(iv) Total Service Tax implication will be (») + (ii) + (iii) = 3.708% on the
total freight
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Notification and Circular Pertaining to Transportation Sector
Illustration -A
(In ` )
Distance Kms 650
Wagon BCNA
CC of Wagon Tonne 66
Rake Length 42
Commodity Cement
Class T/L 150
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(c) Higher Education Cess, and (d) Total Service Tax. Necessary
changes should be made in the formal of RR for inclusion of following
entries:
Name &
Address of customer.
Registration No. of Service Tax provider i.e. FA&CAO of zonal railway.
Amount of Service Tax.
Type of Service.
Code No. of Service.
Exemption Notification No. 1 of 2006 ST dt. 1.3.2006 is being availed.
(Now it is Notification No 26/2012-ST)
(vi) Till allotment of Registration No., Zonal railways will be required to
mention ^Applied For* against the space provided for Registration No.,
TMS software will also print 'Applied For' in the Computerised RRs till
such time as CAO/FOIS is intimated about their Registration Nos„ by
FA&CAOs of Zonal Railways.
(vii) In case any undercharges or other chargcs arc collected at the
destination station, then service tax at the stipulated percentage
should be collected by the destination railway on such other
components also.
(viii) Service tax as applicable shall be collected along with the Wagon
Registration Fee (WRF) and, separately at the stage of booking the
consignment through RR on the respective amounts. In case of any
refund of either the WRF or freight chargcs, the corresponding Service
Tax shall also be refunded.
(ix) As per Rule 6 of the Service Tax (Determination of Value) Rules 2006,
"the amount realized as demurrage or by any other name whatever
called for the provision of service beyond the period originally
contracted or in any other manner relatable to the provision of service"
is included as part of the taxable service.
Accordingly, the levy of any demurrage and wharfage charges in case
of transportation of goods by Rail shall attract Service Tax at the rate
of 3.708%. Zonal' Railways, FOIS/CRIS are instructed to levy the
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etc. are obtained and all concerned made well conversant with the same.
Provisions pertaining to Service Tax are available in Finance Act, 1994 and
Service Tax Rules, 1994 as amended subsequently from time to time. Some
of the relevant notifications are Notification No. 1 of 2006 - Service Tax dated
01.03.2006, Notification No. 25 of 2012 - Service lax and Notification No. 26
of 2012 - Service Tax dated 20.06.2012 issued in this regard, can be
downloaded from the official website www.servicetax.gov,in,
7. Instructions regarding Registration No., head of allocation, accounting
procedure, system of making payment etc..have already been issued by the
Accounts Directorate vide Rly. Board letter No.2010/AC 11/1/3 dated
29.06.2012.
8. Any modification in the policy made by Ministry of Finance from time to
time will become applicable ancUvill be notified accordingly.
9. These instructions will come into force w.e.f. 01.10.2012.
This issues in consultation with Finance Directorate of Ministry of Railways.
D.A / As above.
(Sattjay Kumar Jha)
Dy. Director, Traffic Commercial (Rates)
Railway Board
No: TCR/1078/2011/2
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Notification and Circular Pertaining to Transportation Sector
Sd/-
(A.S.MEENALOCHANI)
DEPUTY COMMISSIONER
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Chapter 8
Head Notes – Judgements
Credit of GTA till the place of provision of service
1. Sundaram Industries Ltd. Versus Commissioner of Central
Excise, Tiruchirapalli 2013 (11) TMI 1506 – (Tri- Chennai)
Facts:The appellant herein is engaged in the business of re-treading of
tyres. With some clients, they had agreements to go to the site of the service
receiver, take the defective tyres, bring it to their premises, re-tread it and
take it back to the place of service receiver and to fix the tyres on the
vehicles. In such cases, the value of services charged was inclusive of the
value of transportation of the tyres from the premises of the service receiver
to the applicant’s premises and back. Service tax was paid on such value.
The appellant also paid service tax on the transportation of goods as receiver
of the service under reverse charge mechanism and took CENVAT credit of
such tax paid and utilized such CENVAT credit while discharging tax liability
on re-treading of tyres.
Question: Whether the credit of service tax paid under GTA which is its input
service be eligible?
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Question:
Can the benefit of abatement be available to the service recipient?
Held:
By placing documents indicating transport of goods under appropriate
consignment note, assessee had discharged its burden of proof. It was duty
of transporters to satisfy conditions of law while issuing consignment note.
Revenue should find out from transporters whether there was any deviation
to fulfilment of condition prescribed in notification. Since such verification
was not done, abatement cannot be denied to assessee-recipient.
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Head Notes – Judgements
sugarcane by the farmers at the sugar mills. Assessee's sugar mills had set
up cane collection centers where the farmers could deliver the sugarcane by
making their own arrangement. The transportation of sugarcane from various
cane centers to the sugar mills, was arranged by the assessee by arranging
the transport and the charges for the same at an average rate were deducted
from the price for sugarcane paid to the farmers.The transporters engaged
by the assessee's were individual truck owners who charged for
transportation of the sugarcane from the sugarcane collection centers to the
respective sugar mills by presenting fortnightly bill and as such no
consignment notes were issued.
Question:
Whether service tax is required to be paid under Goods Transport Agency?
Held:
Mere transportation of the goods in a Motor Vehicle is not the service
provided by a Goods Transport Agency. A Goods Transport Agency in term
of its definition under section 65(50b) provides service in relation to
transportation of goods under a consignment note which should have the
particulars as prescribed in explanation to rule 4B.
In the present case, admittedly, no consignment notes have been issued.
The fortnightly bills cannot be treated as consignment notes, as a
consignment note issued by Goods Transport Agency represent its liability to
transport the consignment handed over to it to the destination and deliver the
same to the consignee and merely a bill issued for transportation of goods
cannot be treated as Consignment Note.
The transportation of goods by individual truck owners without issue of
consignment note, GR's &billties etc. as prescribed in rule 4B of the Service
Tax Rules, would be simple transportation and not the service of Goods
Transport Agency which involves not only undertaking the transportation of
the goods handed over to it but also undertaking delivery of the goods to the
consignee and also temporary storage of the goods till delivery. When the
transports did not issue consignment notes or G` or Challans or any
documents containing the particular as prescribed in Explanation to rule 4B
of the Service Tax Rules, 1994, the Transporters cannot be called 'Goods
Transport Agency' and, hence, in these cases, the service of transportation
of sugarcane provided by the transporters would not be covered by section
65(105)(zzp).
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Hence, there will be no service tax liability on the assessee sugarcane mills,
as they have not received the service from a Goods Transport Agency.
This principle has also been followed in KisanSahkariChinni Mills Ltd. vs.
CCE, Lucknow [2014] 47 taxmann.com 98 (New Delhi – Tri); Bazpur Co-
operative Sugar Factory Ltd v. CCE [2012] 23 taxmann.com 428 (New Delhi -
Tri);
Where the service tax has been paid by service provider, it cannot again
be claimed from service provider
8. Umasons Auto Compo (P.) Ltd.v. CCE, Aurangabad[2014] 42
taxmann.com 347 (Mumbai - Tri)
Head Notes
Section 68, read with section 65(50b), of the Finance Act, 1994 read with
rule 2(1)(d)(v) of the Service Tax Rules, 1994 - Payment - Reverse
charge/Partial reverse charge under Service Tax - Department demand
service tax from assessee, a recipient of Goods Transport Agency's (GTA)
service, under reverse charge - Assessee-recipient argued that it had paid
service tax to service provider and such service provider has paid such
service tax to revenue and, therefore, demand from assessee was duplicate -
Department argued that as per provisions of Finance Act, recipient is liable to
pay service tax in respect of GTA service and if same has been paid by
service provider, he can seek refund of amount - HELD : There was no
dispute regarding payment of service tax by provider of GTA service - Once
amount of service tax is accepted by revenue from provider of GTA service, it
cannot be again demanded from recipient of GTA service - Hence, demand
was set aside [Para 5] [In favour of assessee].
Authors Comment
With due respect to the principle contained in the above pronouncement, the
law states that tax is required to be the recipient of service. The liability to
pay tax cannot be shifted from one person to another.
If consignor of goods is a company/factory under Factories Act, then, as per
Rule 2(1)(d)(v) of Service Tax Rules, 1994, irrespective of status of
consignee, person liable to pay service tax is person liable to pay freight and,
therefore, no service tax can be demanded from Goods Transport Agency.
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Question:
Whether assessee had availed goods transport agency's services so as to be
liable to pay service tax as recipient of service ?
Held:
For levy of service tax under goods transport agency's services, there must
be consignor-consignee relationship, transport must be by road and, further,
consignment note should contain registration number of goods carriage -
Bullock carts, having no registration number, cannot be subjected to levy at
all - Further, in view of Exemption Notification and Budget Speech 2004-05,
there is no intention to levy service tax on small transporters.
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Chapter 9
Practical Illustration for
Transportation Sector
1. X Ltd hires a goods transport agency for carrying biscuits and pays `
10000/- to Goods transport agency.
Ans: Sr No 21(e) of Notification No 25/2012-ST grants exemption for
services provided by a goods transport agency, by way of transport in a
goods carriage of foodstuff including flours, tea, coffee, jaggery, sugar, milk
products, salt and edible oil, excluding alcoholic beverages. Thus, biscuit is a
food stuff, hence, service tax will be exempt. However, in the service tax
return, it is required to be shown as exempt service.
2. X Ltd hires a goods transport agency for carrying sprite and pays `
10000/- to Goods transport agency.
Ans: Sr No 21(e) of Notification No 25/2012-ST grants exemption for
services provided by a goods transport agency, by way of transport in a
goods carriage of foodstuff including flours, tea, coffee, jaggery, sugar, milk
products, salt and edible oil, excluding alcoholic beverages. Thus, sprite is a
food stuff and not an alchohol, hence, service tax will be exempt. However,
in the service tax return, it is required to be shown as exempt service.
3. X Ltd hires a goods transport agency for carrying wine and pays `
10000/- to Goods transport agency.
Ans: Sr No 21(e) of Notification No 25/2012-ST grants exemption for
services provided by a goods transport agency, by way of transport in a
goods carriage of foodstuff including flours, tea, coffee, jaggery, sugar, milk
products, salt and edible oil, excluding alcoholic beverages. Thus, wine is an
alchoholic beverage, hence, service tax will have to be payable.
4. X Ltd is an exporter, hires the services of Goods Transport Agency for
carrying goods from his factory to port. Is service tax payable on the said
service.
Ans: The service tax is required to be paid on the said service. However,
later on its refund can be claimed by following the procedure contained in
Notification No 41/2012-ST.
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Practical Illustration for Transportation Sector
The provisions of the Chapter V of Finance Act, 1994 extends to the whole of
India except Jammu and Kashmir. [Section 64(1)]
As per section 66B, ‘There shall be levied a tax (hereinafter referred to as the
service tax) at the rate of twelve per cent. on the value of all services, other
than those services specified in the negative list, provided or agreed to be
provided in the taxable territory by one person to another and collected in
such manner as may be prescribed.’ [Section 66B]
The definition of exempted service, inter alia states that it is a service, on
which no service tax is leviable under section 66B of the Finance Act. Thus,
when services are provided in Kashmir, no service tax is payable thereon as
per section 66B of the Finance Act, 1994. Thus, it an exempted service.
Hence, Rule 6(3) of CENVAT Credit Rules, 2004 is required to be followed.
8. X Airlines Limited received goods to be delivered as under:
(a) ` 10 lakhs for delivering goods from Kashmir to Kerala;
(b) ` 15 lakhs for goods to be delivered from Pune to Japan;
(c) ` 20 lakhs for goods to be delivered from Japan to Canada,
consideration received in convertible foreign exchange.
(d) ` 25 lakhs for goods from Kashmir to Kanyakumari
(e) ` 20 lakhs from Mumbai to Nepal, consideration in Indian Rupees.
(f) ` 5 lakhs from Mumbai to Nepal, consideration in convertible foreign
exchange.
Total CENVAT credit on eligible input and input services is ` 30 lakhs. How
much CENVAT credit is required to be reversed as at the end of the year
presuming X Airlines opts for proportionate reversal as per Rule 6(3A) of
CENVAT Credit Rules, 2004.
Ans: The taxable service would include
` 10 lakhs for delivering goods from Kashmir to Kerala;
` 25 lakhs for goods from Kashmir to Kanyakumari
Exempt Service
` 15 lakhs for goods to be delivered from Pune to Japan;
` 20 lakhs from Mumbai to Nepal, consideration in Indian Rupees.
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Export Service
` 20 lakhs for goods to be delivered from Japan to Canada,
consideration received in convertible foreign exchange.
` 5 lakhs from Mumbai to Nepal, consideration in convertible foreign
exchange.
Total amount received for taxable service is ` 35 lakhs, for exempted
service is ` 35 lakhs and for Export service ` 25 lakhs.
The amount that is required to be reversed as per Rule 6(3A) of
CENVAT Credit Rules, 2004 is ` 11.05 lakhs. [30 lakhs x (35 lakhs) /
(35 lakhs + 25 lakhs + 35 lakhs)]
9. X Ltd is located in India. It is availing services of UPS courier, to
deliver goods from Russia to Canada, the payment is made by them in
foreign currency. Is this transaction taxable in India?
Ans: In this case, the place of provision of service is the recipient of service
as per Rule 3 of place of provision of service Rules, 2012.
As per Explanation 3 to section 65B(44), ‘an establishment of a person in the
taxable territory and any of his other establishment in a non-taxable territory
shall be treated as establishments of distinct persons’
Thus, the following situations emerge:
If X Ltd has also establishment, say branch outside India and the
services are received by its establishment outside India, then as per Sr
No 34(c) of Notification No 25/2012-ST, Services received from
a provider of service located in a non- taxable territory by a person
located in a non-taxable territory is exempt.
If X Ltd does not have an establishment outside India, then the
services are received by X Ltd forthe purpose of business in India, in
such case, as a recipient of service, service tax is required to be paid.
10. X Ltd is located in India. It is availing services of UPS courier, to
deliver goods from Russia to India, the payment is made by them in foreign
currency by X Ltd. Is this transaction taxable in India?
Ans: In this case, the place of provision of service is the recipient of service
as per Rule 3 of place of provision of service Rules, 2012.
As per Rule 2(1)(d)(G) of Service Tax Rules, 1994, ‘“person liable for
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recovers ` 500000/- in a year for providing the services. What is the tax
payable on the same?
Ans: As per section 66D(p)(iii), transportation of goods by inland waterway is
covered in the Negative List. However, transportation of goods fromMundra
Port to Vishakhapatnam Port is not through inland water, but it is through
coastal water. Hence, service tax is payable on the same. However,
abatement of 60% is available, provided CENVAT credit of inputs, capital
goods and input services has not been taken.
15. X Ltd has received services of Y Ltd for transportation of goods from
mother vessel to Jetty. Is this transaction taxable?
Ans: As per United Shippers Ltd. V. CCE2014 (12) TMI 502 (Mumbai - Tri),
when the goods are being transported by the barges from the mother vessel
to the jetty onshore, that activity is part of the import transaction of bringing
the goods into India from a place outside India. The question of rendering
any service in respect of such goods can take place only after the customs
transaction is completed. Therefore, the question of levying to service tax the
transportation by barges from the mother vessel to the jetty onshore, would
not arise.
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Frequently Asked Questions on
Transportation Sector
After 01.07.2012, service tax is there on all services except the one that are
specified in Negative List and the ones that are exempt by way of exemption
Notification. In the under mentioned write up, Service Tax applicability on
Transportation sector is being discussed.
Transportation of Goods
1. What categories of services relating to transportation of goods
arecovered in the Negative List?
Ans: From 01.07.2012, Government has specified Negative list in service
tax. ‘Negative List’ comprises that list wherein there will not be any tax on the
services specified in that list. Government has specified that list in Section
66D of the Finance Act, 1994. As far as transportation of goods by road is
concerned, the following services provided in relation to transportation of
goods are specified in the negative list of services which are:
Transportation of goods by road except the services of (i) a goods
transportation agency; or (ii) a courier agency;
Transportation by aircraft or vessel from a place outside India up to the
customs station of clearance in India; or
by inland waterways.
Ans: "Goods transport agency" means any person who provides service in
relation to transport of goods by road and issues consignment note, by
whatever name called. [Section 65B(26) of the Finance Act, 1994]
4. There are many organizations who have their own trucks. When
the organization supplies its own goods in the trucks owned by them,
whether such service would be covered under service tax?
Ans: Transportation of goods by road except by way of Goods Transport
Agency and Courier is covered in the negative list. Service tax is on ‘Goods
Transport Agency’ and not on the ‘Goods Transport Operator’. In a simplest
way ‘agent’ means acting on behalf of another. Whenever goods are
purchased by any person which are required to be delivered to the premises
of the customer, then the same can be arranged in under mentioned ways:
(a) Seller or Consignor delivers goods in the truck owned by them: In such
case, there is no ‘agency’ involved; hence, there will not be any
service tax, even if later on Consignor recovers charges for services
provided by it. The word 'agency' in GTA should be construed given
the definition of agent in Section 182 of the Indian Contract Act, 1872,
as per which an 'agent' is a "person employed to do any act for
another or to represent another in dealings with the third persons".
When the aspect of ‘agency’ is absent in case where a truck owner or
operator gives a truck without an agent being go-between, there can
be no tax. [From para 6.6 of CCE& C, Guntur Versus Kanaka Durga
Agro Oil Products Pvt. Ltd. &Anr[2009] 22 STT 435 (BANG. -
CESTAT)]
(b) Buyer agrees to take goods in its truck, in such a case, the buyer
provides services to itself. Thus, no question of service tax arises.
(c) Seller arranges for transport of goods by arranging truck. In such a
case, the truck owner carries the goods from one destination to
another, but it would be on behalf of seller. Thus, truck operator acts
as an agent of seller. In such a situation, there will be service tax as
the services are provided by ‘Goods Transport Agency’
In Para 149 of Budget 2004 of the Union Finance Minister's speech, Hon’
Finance Minister has clarified that there is no intention to levy service tax on
truck owners or truck operators.
Thus, only when element of ‘agency’ is present, there will be service tax on
transport of goods by road services provided by Goods Transport Agency.
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Factories Act, 1948 applies to factories covered under the Factories Act,
1948. The industries in which ten (10) or more than ten workers are
employed on any day of the preceeding twelve months and are engaged in
manufacturing process being carried out with the aid of power or twenty or
more than twenty workers are employed in manufacturing process being
carried out without the aid of power, are covered under the provisions of this
Act.
Thus, if a proprietor manufacturer is registered or governed by the provisions
of Factories Act, 1948, then the said proprietor is a person liable to pay
service tax and consequently service tax is to be paid by him as a service
receiver.
13. Is basic exemption limit of ` 1000000/- as contained in
Notification No 33/2012-ST available while making payment of service
tax under reverse charge.
Ans: The basic exemption limit of ` 1000000/- as contained in Notification
No 33/2012-ST is available to the person providing service and not the
person receiving service.
14. Whether Gross Value of taxable services on which recipient has
paid service tax as specified under Section 67(2) of the Finance Act,
1994 read with Service Tax Rules 1994, charged by goods Transport
Agency shall be counted for determining aggregate value of small scale
exemption ?
Ans: No. The Gross amount charged by Goods Transport Agency under
Section 67 ibid to the recipient of service shall not to be taken into account
for determining the aggregate taxable value under the small scale exemption.
[para 8.2 of FAQ on service tax issued by Department dated 05.02.2009]
15. Can the service tax under reverse charge be paid by utilising
CENVAT credit?.
Ans: As per Rule 3(4)(e) of CENVAT Credit Rules, 2004, CENVAT credit can
be utilised for payment of service tax on any output service. Whenever,
service tax is payable as a recipient of service, it is an input service and not
an output service; hence, the CENVAT credit can not be utilised for payment
of service tax under reverse charge.
This has also been clarified by inserting explanation to Rule 3(4) of CENVAT
Credit Rules, 2004 which states that CENVAT credit cannot be used for
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Frequently Asked Question on Transportation Sector
payment of service tax in respect of services where the person liable to pay
tax is the service recipient.
16. Can the credit of service tax paid on ‘Transport of Goods by
Road’ be available?
CENVAT credit of input service is available. In this regard, it is
pertinent to note the definition of ‘input service’ which is contained in Rule
2(l) of CENVAT Credit Rules, 2004 which reads as
‘“Input service” means any service, -
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to
the manufacture of final products and clearance of final products upto the
place of removal,
and includes services used in relation to modernisation, renovation or
repairs of a factory, premises of provider of output service or an office
relating to such factory or premises, advertisement or sales promotion,
market research, storage upto the place of removal, procurement of inputs,
accounting, auditing, financing, recruitment and quality control, coaching and
training, computer networking, credit rating, share registry, security, business
exhibition, legal services, inward transportation of inputs or capital goods
and outward transportation upto the place of removal; but excludes,-
(A) service portion in the execution of a works contract and construction
services including service listed under clause (b) of section 66E of the
Finance Act (hereinafter referred as specified services) in so far as they are
used for -
(a) construction or execution of works contract of a building or a civil
structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
except for the provision of one or more of the specified services; or
(B) services provided by way of renting of a motor vehicle, in so far as they
relate to a motor vehicle which is not a capital goods; or
(BA) service of general insurance business, servicing, repair and
maintenance , in so far as they relate to a motor vehicle which is not a capital
goods, except when used by -
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Thus, where goods are cleared from depot, in such case, credit of service tax
on transportation from factory to depot is permissible; however, credit of
service tax on transportation from depot to customer’s premises is not
permissible as an input service.
17. Can the credit of ‘Handling of Cargo’ and Service tax on
‘Transport of goods by Road’ upto port in case of exports be available?
Ans: When manufacturer transports his finished goods from factory to any
other place such as, go-down, warehouse, etc. from where it would be
ultimately removed, such service is covered in expression "outward
transportation upto place of removal" since such place other than factory
gate would be place of removal.
Taking this analogy further, in case services are availed essentially for
purpose of exporting goods, then, place of removal shall have to be
essentially ' port' from where goods are actually taken out of country and,
accordingly, said services (including transportation of finished goods upto
such place of removal being port) would be input service.
Therefore, in case of export of final product, place of removal would be port
of shipment and not factory gate and therefore, manufacturer would be
entitled to credit of input services availed upto such ' port of shipment'.
[Central Excise Versus Inductotherm India P Ltd (2014) 3 TMI 921 (Gujarat
HC)]
Alternatively, its refund can also be claimed in terms of Notification No
41/2012-ST dated 20.06.2012
18. Sometimes, a person hires a truck to a Goods Transport Operator
and collects the rent on hiring of truck. Whether, such hiring of truck is
taxable?
Ans: There is no service tax on services by way of giving on hire to a goods
transport agency, a means of transportation of goods [Sr No 22(b) of Mega
Exemption Notification 2012]
19. What is the place of provision of Rules in case of transportation
of goods by Road?
Ans: The place of provision of services of goods transportation agency shall
be the location of the person liable to pay tax. [Rule 10 of Place of Provision
of service Rules, 2012]
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Thus, where goods are to be sent from Goa to Nepal and freight is payable
by consignor, in this case, the service tax is required to be paid by the
consignor.
When freight is payable by a person located in a non-taxable territory, the
provider of such service shall be liable to pay service tax i.e., in such case,
the GTA will have to pay service tax.
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Ans: As per the provision of Place of Provision of Services Rules, 2012, Rule
10 states that the place of provision of services of transportation of goods,
other than by way of mail or courier, shall be the place of destination of the
goods. Thus, where journey for transportation of goods commences from the
State other than that of Jammu and Kashmir to the State of Jammu and
Kashmir, the transaction is not taxable.
26. Is CENVAT credit of service tax paid on freight is eligible as
CENVAT Credit?
Ans: Service tax on inward transportation of goods is eligible.
Service tax on outward transportation from the place of removal will not be
available in terms of Rule 2(l) of CENVAT Credit Rules, 2004.
The eligible document for availing credit is a Service Tax Certificate for
Transportation of goods by Rail (herein after referred to as STTG Certificate)
issued by the Indian Railways, along with the photocopies of the railway
receipts mentioned in the STTG certificate [Rule 9(1)(fa) of CENVAT Credit
Rules, 2004]
27. Can Railway avail full CENVAT credit on inputs, input services
and capital goods?
Ans: There are certain goods whose transportation is exempt by Railway.
Hence, Railway has two options. One, maintain separate records of inputs
and input services with respect to taxable and exempted services and avail
credit only of inputs and input services which are utilised for providing
taxable services. Alternatively, where it is not possible to maintain separate
records for inputs and inputs utilized in providing taxable and exempted
services, in such case, the Railway can opt for under mentioned options
which are mentioned in Rule 6(3) of CENVAT Credit Rules, 2004 viz:
Pay 2% of the value of exempted services.
Avail proportionate credit
Since for capital goods, the credit of the same cannot be availed, if the same
is utilised exclusively for providing exempted services. Where the capital
goods are utilised for providing taxable and exempted services, the CENVAT
credit of the same is admissible. [Rule 6(4) of CENVAT Credit Rules, 2004]
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National Waterway
"National waterway" means the inland waterway declared by section 2 of the
National Waterway (Allahabad- Haldia Stretch of the Ganga- Bhagirathi-
Hooghly River) Act, 1982 (49 of 1982 ), to be a national waterway.
Explanation.-- If Parliament declares by law any other waterway to be a
national waterway, then from the date on which such declaration takes effect,
such other waterway-
Transportation of goods from India to outside India will not be taxable as per
place of provision Rules, 2012 as place of provision of goods is destination of
goods which is outside taxable territory.
Service tax is also not required to be paid on a transportation of goods from
a place outside India upto the custom station clearance in India.
Thus, in effect, service tax will have to be paid on transportation of goods by
a vessel in coastal waters. [para 4.16.5 of Education Guide]
Section 2(7) of the Customs Act, 1962 states that "coastal goods" means
goods, other than imported goods, transported in a vessel from one port in
India to another.
Thus, there will be service tax on transportation of goods in coastal waters
i.e., from one port to another.
41. Are services provided as agents for inland waterways covered by
this entry?
Ans: No. these are in the nature of services used for providing the negative
list entry service of transport of goods on inland waterways and would not be
covered by application of the rule for interpretation where services are
specified by way of description contained in clause (1) of section 66F of the
Act. [Para 4.16.6 of Education guide]
Thus, the services of an agent is different from services provided in an inland
waterway and therefore, services provided by an agent will not fall under the
Negative list.
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following services are covered under Negative List. They are services by way
of transportation of goods –
(a) by road except the services of –
a goods transportation agency; or
a courier agency;
(b) by an aircraft or a vessel from a place outside India to the first
customs station of landing in India; or
(c) by inland waterways;
Section 65B(20) of the Finance Act, 1994 defines courier agency as
‘"courier agency" means any person engaged in the door-to-door
transportation of time-sensitive documents, goods or articles utilising the
services of a person, either directly or indirectly, to carry or accompany such
documents, goods or articles;’
The service provided by courier agency is not covered under Negative List,
nor the same is covered in exemption Notification. Hence, the same is
taxable.
43. Whether services provided by 'angadia' are liable to service tax as
a courier service?
Ans: 'Angadia' undertakes delivery of documents, goods or articles received
from a customer to another person for a consideration. Therefore, 'angadias'
are covered within the definition of a 'courier' and services provided by
angadia are liable to service tax. [Para 4.16.4 of Education Guide]
44. Whether the service provided by couriers/angadias for delivery of
cash received at one place and handed over at another place is a
taxable service covered under the definition of ‘Courier Agency’ under
provisions of Section 65B(20) [Prior to 01.07.2012, it was Section 65(33)]
of the Finance Act, 1994?”
Ans: Angadias are engaged in courier/angadia services and are transporting
valuable articles and documents from one place to another. Along with that,
they also provide services in respect of the cash transactions from one place
to another. Many a times it happen that cash is not physically transported
from one place to another and the same currency notes are not delivered to
the consignee. In fact, all the angadias engaged in the service of cash
transactions keep sufficient cash at branch level on a particular day to meet
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Frequently Asked Question on Transportation Sector
the services of cash transaction and only instructions are passed on to the
branches for payment/receipt. In this case, the service receiver has no
objection to the above method adopted by the angadias, since the service
receiver is usually concerned with the receipt of amount at the destination
and he is not interested that the same currency notes, which are delivered by
him to the angadias, should be delivered at destination. Thus, when the
service receiver hands over cash in Indian currency at a recipient branch,
which transfers instructions to the delivery branch, where payment is made
from the corpus available at the delivery branch. Thus, there is no movement
of the cash from the recipient branch to the delivery branch. There is no
transportation of such cash and thus does not fall within the ambit of “courier
agency”. [CCE Surat v. Patel VishnubhaiKantilal and Co. (2012) 28 STR 113
(Guj HC) =(2013) 2 TMI 156 (Guj HC) ]
In case the service receiver, for any reasons, is interested that currency note
or notes given by him to the angadia are to be delivered at the destination,
the angadia will have no choice but to transport the same to the destination
and deliver accordingly. In such case, the service provided will be covered
under ‘Courier Agency’ Service.
45. The definition of ‘Courier Agency’ states that courier agency"
means any person engaged in the door-to-door transportation of time-
sensitive documents, **’ In this regard, can you clarify as to what is
meant by door to door transportation and how the same is different
from transport of goods by Road?
Ans: It is a prevalent practice in the courier industry that at the time of
booking cargo, the consignor or sender visits the courier company and books
the cargo or parcel or document (referred to as ‘article’) and provides the
details. The courier company then books the ‘article’ and delivers to the
desired destination. It has been held in the case of VijayanandRoadlines Ltd
v. CCE Belgaum (2005) 8 TMI 409 (Tri- Bang) = (2006) 1 STR 113 that
Courier Agencies undertake the service of transportation of goods and
documents from one place to another where time sensitivity and ensuring
delivery at the door is the prime criteria. Only in respect of very big
customers, the courier agencies collect the documents from the premises of
the customers and deliver to the consignees. They do not collect the
documents at the door of every consigner. Even if the consigner goes to the
office of the courier for depositing the documents, the same should be
considered door-to-door delivery.
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per Place of Provision Rules, 2012. The said activity will be covered by Rule
3 of the said Rules which states that ‘the place of provision of a service shall
be the location of the recipient of service’.
Thus, where ‘A’ is located in India, the place of provision of service will
be in India and consequently, the service will be taxable in India.
If ‘A’ is located outside India, the services will be said to have been
provided outside India and will also qualify for export, provided the
amount is received in freely convertible foreign currency and other
conditions as per Rule 6A of Service Tax Rules, 1994 are met.
If ‘A’ is located in ‘Jammu and Kashmir’, in such a case, the place of
provision of service shall be ‘Jammu and Kashmir’ and accordingly,
the service will not be taxable.
Where location of service receiver is not known, the place of provision of
service will be location of service provider.
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