Foreign Shipping Lines to Pay Service Tax
in India on Freight Charges on India Bound Consignments
[Circular No. 206/4/2017-Service
Tax dated 13 April 2017]
Issues related to levy of service tax on the services provided by a
person located in non-taxable territory to a person located in non-taxable
territory by way of transportation of goods by a vessel from a place outside
India to the customs station in India.
Sub: Issues related to levy of service tax on the services provided by a person located
in non-taxable
territory to a person located in non-taxable
territory by way of
transportation of goods by a vessel from a place outside
India
to
the customs
station in India.
Your kind attention is invited to notification
No. 1/2017-ST dated 12 January, 2017, whereby service tax exemption
was withdrawn for services
provided by a person located in
non-taxable territory to a person located in non-taxable territory by way of transportation of
goods by a vessel from a place outside India up to the customs station of clearance
in India.
Further, in relation
to such services, the person in India who complies with sections 29, 30 or 38
read with section
148 of the Customs
Act, 1962 (52 of 1962) with respect to such goods,
was notified as the person liable to pay service tax vide notification
No.
2/2017 and 3/2017- ST both dated 12 January, 2017.
2. Several representations have been received seeking clarification on
levy
of service tax on
the services provided by a person located
in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India to the customs station in India. Consequently, it has been decided to make certain amendments in the service tax provisions in this regard. In this context,
kind attention is invited to notification
No. 13/2017-ST, 14/2017-ST, 15/2017-ST and 10/2017-CE (N.T.) all
dated 13 April, 2017, which are explained as given below.
2.1 Vide notification
Nos. 13/2017-ST and 15/2017-ST both dated 13 April, 2017, the
importer
of goods as defined in the Customs Act, 1962 has been made liable for paying
service tax in cases of services of transportation of goods by sea provided by a foreign shipping
line to a foreign charterer with respect to goods destined for India. This change shall come into effect from 23 April, 2017.
2.2 Vide notification
No. 13/2017-ST dated 13
April, 2017, the person liable to pay service tax
has been provided an alternate mechanism for calculating and paying service tax.
Swachh Bharat Cess and Krishi kalyan
Cess will be paid accordingly. This option has
been made available with effect from 22
January, 2017.
2.3 Vide notification
No. 14/2017-ST dated 13 April,
2017, the point of taxation of services
provided by a foreign shipping line to foreign charterer with respect to goods
destined for India, has been specified as the date of bill of lading of goods in the vessel
at the port of export. This option will be available with effect from 22 January, 2017.
Thus, no service tax is leviable if the bill of lading is of date prior to 22 January, 2017.
2.4 Vide notification No. 10/2017-C.E (N.T) dated 13 April, 2017, the importer of the goods has been allowed to avail Cenvat credit on the basis of the challan
of payment of
service tax by the said importer on the services provided
by a
foreign shipping line to a foreign charterer
with respect to goods destined
for
India. This change
shall come into
effect from 23 April, 2017.
3. Clarification has also been sought with regard to calculation of service tax regarding
services of transportation of goods by sea provided by a foreign shipping line. In case of
services of transportation of goods by sea provided by a foreign shipping line to a foreign charterer w.r.t. goods destined
for India, an option has been provided in the Service Tax
Rules to pay service tax @ 1.4% of value of imported goods
as determined under Section 14 of
the Customs Act, 1962 and the rules made thereunder.
3.1 In addition, Swachh Bharat Cess and Krishi kalyan Cess
will be paid accordingly
[ST @1.4% of Customs value of goods, Swachh
Bharat Cess and Krishi
Kalyan Cess
each @ 0.05% of Customs value of goods].
3.2 This option has been made available with effect from 22 January, 2017.
4. It is pertinent
to point out here that under notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of
goods in a vessel subject to the fulfillment of the condition that Cenvat credit on inputs and
capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit
Rules, 2004. This
conditional exemption has been extended for the reason that out of the full value of such services, the exempted value of
service has already suffered taxes (Central Excise) which would have been available
as Cenvat credit to set off service tax on full value of service. In effect, service tax
is levied on the value added only.
However, in case
of foreign shipping
lines, their services being exports from their home country, are zero-rated in their home country and thus have suffered no
taxes. Further the foreign shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules.
4.1 Thus, the condition for availing
exemption under notification No. 26/2012-ST dated
20.06.2012 (Sl. No. 10) is not fulfilled
by the foreign shipping lines. Hence, benefit of
conditional exemption will not be available to them and service tax will be paid on full value
of services. Further, the amount of service tax payable under the option available
under Service Tax Rules, 1994 has been prescribed accordingly.
5. All concerned are requested to acknowledge the receipt
of this circular.
6. Trade Notice/Public Notice to be issued. Difficulty if any, in the implementation of
the circular should
be brought to the notice
of the Board.
F.No.354/42/2016-TRU
Service Tax Notification No. 13 dated 12th
April 2017
Service Tax Notification No. 14 dated 13th
April 2017