NOTIFICATION FOR CUSTOM HOUSING SERVICE

As per INSTRUCTION F. NO. B 43/1/97-TRU, DATED 6-6-1997/TRADE NOTICE NO. 5/97-ST, DATED 12-6-1997, MUMBAI COMMISSIONERATE-I, in CASE of import & export of goods, service of custom house agent is taxable on service which is performed by CHA. It is clarified that in relation to Custom House Agent, the service Tax is to be computed only on Gross service charges by whatever head/nomenclature, billed by the Custom House Agent to the client. It is informed that the practice obtaining is to show the charges for services as ‘agency commission’, ‘charges’, ‘agency and attendance charges’ and some similar descriptions. The service tax will be computed only with reference to such charges. In other words payment made by CHA on behalf of client, such as statutory levies (CESS, Custom  Duties, Port Dues, etc.) and various other reimbursable expenses incurred are not to be included for computing the service Tax.

 So as per bundled service provision all provision of freight forwarding apply with notification and circular as notified by central board of excise and custom. 

     Hence, it may be advisable to split up the contract into three

1. Outside India (as an intermediary)
2. Ocean freight (actual basis) and
3. Services within India

           If the contract is split up, as given blow than taxable part will be only service performed in taxable territory.

• Commission received from foreign freight forwarder-for e.g. Profit share received from foreign agent or amount received any other nomenclature.
• Services provided in India :
• Destination charge in case imports .e.g. delivery order fee, custom clearance fee, inland haulage charges,Terminal Handling Charges etc.
• Origin charges incaseexport e.g. delivery order fee, custom clearance fee, inland haulage charges, Terminal Handling Charges etc.
• Ocean freight (actual basis)- This should be only actual amount on which custom duty has been charged by costume authority at the time of valuation of goods as per valuation rule of Costume Act,1962
• Outside India (as an intermediary)-in CASE import ex-work charges at origin (collect shipment) e.g. Pick up charge at origin, Ex-Work Charges at origin, Custom Clearance charges at origin, Terminal Charges at Origin, Seal fees at origin, Booking fees at origin, Warehouse Charges at Origin

REVERSES CHARGE MECHANISM:

• Governed by Notification No. 30/2012-ST dated 20.06.2012 W.e.f. 1.7.2012
• Liabilities of both the service provider and service receiver are statutory and independent of each other
• Liability cannot be shifted by mutual agreement
• Reverse charge will not apply where the service receiver is located in non-taxable territory
• Reverse charge shall not be applicable if provider of service was liable before 1.7.2012
•  service Tax will not be payable by service receiver under reverse charge, if service was provided prior to 1.7.2012, even if payment is made after 30.06.2012
• Credit of tax paid can be availed by service recipient if it is input servicefor him
• The credit of tax paid by the service recipient under partial reverse charge would be available on the basis on the tax payment challan (but invoice required)
• Service  provider under RCM may claim refund of tax paid under rule 5(b) of CCR, 2004

NOTIFICATION NO 30/2012

Service where partial reverse charge applicable

• Manpower supply
• Works contract services
• Renting of motor vehicles to carry passenger,

Reverse charge shall be applicable only when following two Conditions are satisfied –

1. service receiver is a business entity registered as a body corporate, and
2. service provider is any one of the following entities –

1. Individual
2. Hindu undivided family (HUF)
3. Firm (including limited liability partnerships)
4. Association of persons

If both the above conditions are not satisfied in respect of these three services, service Tax shall be payable by the service provider in ordinary course of business.

Service where full reverse charge is applicable: -

• Insurance business services by agents
• Goods transportation by road
• Legal services to any business entity located in the taxable territory;
• Service provided by non-executive director of company  to company
• Services provided by Government/local authority excluding specified services, i.e., renting of Immovable property &Service specified in Section 66D of Finance Act, 1994: -
  1. Service by the department of post by way of speed post, express parcel post, life insurance and agency service provided to a person other than a government.
  2. Service in relation to an aircraft or a vessel inside or outside the port
  3. Transportation of goods or passenger
• Services provided by persons located in non-taxable territory to persons located in taxable in Territory (Import of Service)

Know more about information: transfer pricing

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