Applicability of service tax on light house due paid for the vessel/ship to the Govt.

[samiuddin ansari]

My friend's firm engaged in rendering CHA services & steamer agent services to the various customer/clients. During the course of audit, the audit team observed in light of Board's circular no.192/2016 dated 13.04.2016 read with Section 66D (a)(ii) provided as exclusion of services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport, that the light house dues paid to the Govt. i.e Ministry of shipping, road and transport are chargeable under service tax. My point is whether such statutory and mandatory charges paid to the Govt. in relation to vessel management and safety point of view are chargeable or otherwise. We solicits your expert comments and views supported with Notification, circular or clarification as well as case laws.

[KASTURI SETHI]

Dear Querist,

Pl. let me know who is the service provider and who is the service receiver. This service is not under RCM and has been specifically excluded from the list of notified services. Section 68(2) read with Para No.10.1 of Education Guide. (Serial No.E).

After your reply, I shall be able to post correct reply here.

[KASTURI SETHI]

Dear Querist,

Your friend's firm has made payment to Ministry of shipping, road and transport, Govt of India on account of light house dues. It means service has been provided by Govt. of India to the business entity and Service Tax will be applicable only if this service falls under the list of services specified under RCM in terms of Section 68(2) of the Finance Act, 1994 read with Rule 2(1) (d) of Service Tax Rules, 1994 and Notification No.30/12-ST dated 20.6.12 as amended vide Notification No. 22/16-ST dated 13.4.16 (amending Notification No.25/12-ST dated 20.6.12) (Serial No.56)

6.

in respect of services provided or agreed to be provided by Government or local authority by way of support services excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994

Nil

100%

As per serial No.5(3) of Circular No.192/02/16-ST dated 13.4.16, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994 and these services have been excluded from the list of services specified under RCM vide Notification No.30/12-ST dated 20.6.12 (Serial No.6).

Notification No.3/17-ST dated 12.1.17 inserted the following service under RCM

“12.

in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India

Nil

100%”.

Services mentioned under Section 66 D (a) (i), (ii) and (iii) are neither exempted nor fall under RCM. Only transportation of goods by vessel falls under RCM at Serial No.12 effective from 22.1.17. Service Tax on transportation of goods by an vessel is to be paid by service recipient. Thus Service Tax on the amount of light house charges pertaining to services in relation to an vessel or an aircraft are to be paid by the Service Provider.

Hence audit objection raised by the department appears to be incorrect.

AI Summary

Reverse Charge Mechanism limited: lighthouse dues for vessel or aircraft services attract service tax liability on the service provider.
Lighthouse dues paid to the Government are for support services to vessels; service tax applies only if the service is specified under the Reverse Charge Mechanism. Services in relation to a vessel or aircraft were excluded from the notified RCM list, and only the transportation of goods by vessel was later added to RCM. Therefore lighthouse or navigational dues relating to vessels or aircraft do not fall under RCM and the service provider (Government) is liable for service tax.