CA Dinesh Singhal
Recently Government of India has withdrawn the exemption granted to transportation of goods through vessel upto custom station of clearance in India (Inbound Cargo transportation or Import Cargo services) and made the captioned service taxable and the onus of tax payment has been cast on to the person who is completing custom formalities for clearance of goods i.e. the service receiver under reverse charge. We have analyzed the relevant provisions including CBEC clarifications issued on the subject.
- As per the charging Section 66B of the Finance Act, 1994, service tax is leviable on services provided or agreed to be provided in the taxable territory. Place of provision of services is determined as per Section 66C of the Finance Act, 1994 and the Place of Provision of Services Rules, 2012 made thereunder.
- Inbound cargo transportation services are covered under rule 10 of the Place of Provision of Services Rules, 2012 and the place of provision of such services is the destination of the goods and thus they are taxable in India. However, they were exempted from Service Tax vide Entry Number 34 of Notification 25/2012-Service Tax (Mega Exemption Notification).
- With the release of Notification No. 01/ 2017 dated 12.01.2017, amendment has been made stating that the exemption under Entry Number 34 would not be applicable to: “Services by way of Transportation of goods by a vessel from a place outside India up to the customs station of clearance in India’ (i.e. inbound cargo transportation or Import cargo). This notification has been made effective from 22ndJanuary, 2017.
- Further, notification No. 30/2012-Service Tax has been amended to provide that service tax would be payable under reverse charge basis by 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. It implies the person liable to pay service tax would be the person who is responsible for the entering of the vessel at the customs port and delivery of import manifest to the Proper Officer.
- CBEC has further issued circular No.204/2/2017 dated 16thFebruary, 2017 clarifying that transportation services pertaining to goods imported into a customs station in India intended for trans-shipment to any country outside India would not be leviable to service tax.