Service Tax on Sea Freight- Law And Impact


Deletions from Section 66D (“Negative list”) is becoming a yearly exercise incorporated inside the Finance Bill. This season, three services were removed the Negative list. Among such deletions may be the service of transportation of items from outdoors India to first customs station in India. The data discusses rules associated with levy and services information Tax on such services publish 1.6.2016 and implications thereof on various transactions.

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Levy and services information Tax on transportation of items before 01.6.2016

Service of transportation of items from India to outdoors India and the opposite way round was nontaxable before 01.06.2016. The non-levy was due to Rule 10 of Location of Provision of Services Rules, 2012 read with Clause (p)(ii) of Negative list. Briefly Rule 10 of Location of Provision of Services Rules, 2012 provides that location of provision in the service of transportation of items is when of destination of items, aside from the issue of services supplied with a Goods Transportation Agency according of transportation of items by road, by which situation the location of provision may be the positioning of the individual susceptible to pay tax (as determined in relation to rule 2(1)(d) and services information Tax Rules, 1994 (since amended). For eg. A consignment of computers is consigned from Mumbai to Shanghai. The location of provision of items transportation service would be the destination of items viz., Shanghai. Because the destination is outdoors taxed territory, such services of transportation isn’t susceptible to service tax. However, in situation your consignment of machines is consigned from Berlin to New Delhi, the location of provision of individuals service will most likely be New Delhi.

Thus, service of transportation to destination outdoors taxed territory could be a non taxed service and however, service of transportation to destination in taxed territory is taxed and repair Tax will probably be levied accordingly. However, while according to Location of Provision of Services Rules, 2012, such service of transportation of imports into taxed territory was taxed, such services were indexed by negative list. Accordingly, even transportation of items in situation of imports also good within the purview and services information Tax. Accordingly, no Service Tax might be levied on Sea freight and air freight compensated for import of items before 01.6.2016.

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Levy of Customs Duty on services of transportation in situation of imports

Primary reason of inclusion of individuals transportation in negative list was that since such cost of sea freight had been incorporated within the value with regards to levy of Customs Duty thus, levying Service Tax may be levy of two taxes on same return. Section 14of Customs Duty Act, provides that for your purpose in the Customs Tariff Act, 1975 (51 of 1975), the requirement of the imported goods and export goods will be the transaction cost of these goods, basically, the cost really compensated or payable for the goods when offered for export to India for delivery in individuals days and hang of importation, in which the seller and buyer within the products aren’t related and cost may be the sole consideration for the purchase. The Section further provides that such transaction value within the situation of imported goods shall include, in addition for that cost as aforesaid, anywhere compensated or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence charges, costs of transportation for that location of importation, insurance, loading, unloading and handling charges for that extent and in the way per the guidelines produced in this particular account. Accordingly, Rule 10 of Customs Valuation (Resolution useful of Imported Goods) Rules, 2007 provides that in working the transaction value, you will see incorporated for the cost really compensated or payable for the imported goods


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