Terminal Handling Charges - Reimbursement of charges service tax liability

[Asked by Guest]

Dear Sir 1. Whether Terminal Handling Charges (THC) done by Shipping agents comes under “Business Support Services”? 2. If X limited paying THC to Shipping agents & reimburses same amount it from his customer, Y, whether Service tax liability arises for X limited? 3. Whether any liability if reimburses with profit from his customer, Y? 4. If assessee applies for new registration, after 7 days, if no response from department. There will be a deemed registration. Suppose if the assessee has not received any registration certificate, what should be done? How to mention registration certificate number in half- yearly returns?

[Madhukar N Hiregange]

Under business support the managing of distribution and logistics as well as fulfillment services are covered. Therefore it appears that the same may be covered wef 1st may 2006. In normal course reimbursments were not a subject matter of levy of ST. However with the Service Tax (Determination of Value) Rules, 2006 wef 19.4.2006, reimbursements as a pure agent only qualify . For being a pure agent 8 conditions are to be met. One of them is that there is no add on. Therefore it appears that if margin is added then the service would be taxable for the intermediary. If there is no repsonse from the department, a reminder maybe sent( speed post or RPAD) and acknowledgement retained. The Registration number would be the PAN no followed by ST-001 which can be printed in the invoices. The returns can also be filed to the juridicational commissionerate and the covering letter may indicate that the registration is still awaited.

AI Summary

Reimbursement as pure agent exempt from service tax only if eight conditions met; added margin makes intermediary service taxable.
Terminal handling by shipping agents falls under Business Support Services; reimbursements are non-taxable only when treated as a pure agent under the Determination of Value rules and all conditions are met. Any markup or add-on renders the intermediary's reimbursement taxable as a service. Pending registration, send a recorded reminder, use the PAN+ST-001 registration format on invoices, and file returns with a cover letter noting the awaited certificate.