Service Tax liability on ocean freight

[Yatin Bhopi]

We are manufacturer. We regularly import our raw material from various countries. Normally terms are FOB at loading port.

We pay the freight to shipping line company (in $ USD) and insurance to Insurance company from loading port to Indian port .

Are we liable to pay service tax on reverse charge basis on freight paid to shipping line company?

[PAWAN KUMAR]

Dear Sir,

As per my view, service tax is not liable on ocean freight paid to shipping line company under reverse charge mechanism.

[YAGAY andSUN]

Dear Yatin,

Sea freight for goods from outside India to first customs station of clearance in India not taxable. Sea freight for goods from India to outside India not taxable, since per rule 10 of Place of Provision of Service Rules, Place of Provision of Service is outside India.

This is for your kind information.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Rajagopalan Ranganathan]

Sir,

Service by way of transportation of goods by an air craft or vessel from a place outside India upto the customs station of clearance in India is included under Section 66D (p) (ii) of Finance Act, 1994, that is negative list. therefore the said service is not liable to service tax.

[Arun Kumar Singh]

If you are paying freight charges separately and service tax will not be applicable then you need to pay service tax.

AI Summary

Ocean freight non-taxable: imports to first customs station fall outside service tax under negative-list transportation rule. Ocean freight for carriage from outside India to the customs station of clearance in India is treated as not subject to service tax, based on the negative-list exclusion for transportation of goods by vessel and the Place of Provision of Service rules locating the service outside India; the question of reverse charge applicability was raised but the contributors uniformly view inbound sea freight to the first customs station as outside the service tax net.