Whether Demurrage attracts Service tax

[Shyam Naik]

Dear Experts,

Whether demurrage charges collected/charged by service provider attracts service Tax?

For example, A GTA may charge demurrage(also known as detention charge) over and above the freight in case there is delay in loading or unloading. Here freight is undobutedly consideration for service provided, where as demurrage is penal/compensatory in nature.

Kindly opine.

Regards,

 

SL Naik

[YAGAY andSUN]

If demurrage is collected as freight, then service tax is payable under GTA services.

[Vijay Chitte]

Demurrage charges are levied when goods are not cleared within stipulated period. These are penal in nature. The charge is not for providing transport service, Moreover, these are never shown on c/ment Note/ Invoice of GTA. These can not be included for purpose of service tax on GTA service.

CBE&C, vide it circular No. 121/3/2010-ST dated 26-04-2010 has clarified that detention charges charged by shipping company / steamer agent for keeping container beyond specified periods is "Penal rent" and not a service. No service tax will be payable . This principle applies here also.

[KASTURI SETHI]

Stock Broker’s services - Service Tax on delayed payment charges collected by service provider - Clarification

Instruction F. No. 137/25/2011-S.T., dated 3-8-2011

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Clarification regarding Service Tax on delayed payment charges collected by the service provider in respect of Stock Broker’s services - Regarding.

AI Summary

Is Demurrage Subject to Service Tax? Forum Debates Whether Charges by GTAs Are Taxable or Penal A discussion forum addresses whether demurrage charges attract service tax. The original query questions if demurrage, charged by a Goods Transport Agency (GTA) for delays in loading or unloading, is subject to service tax. One response suggests that if demurrage is considered freight, service tax applies. Another argues that demurrage is penal and not part of transport services, thus not taxable. A reference is made to a circular clarifying that detention charges are penal rent, not a service, and therefore not subject to service tax. The discussion also includes a clarification on service tax for delayed payment charges in stock brokerage.