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

AI Summary

Demurrage charges may be taxable when treated as freight but may be excluded as penal rent not constituting service.
Whether demurrage attracts service tax depends on characterisation: if collected as freight it is taxable under GTA services; if penal or compensatory (detention beyond stipulated periods) it is treated as penal rent and not a service, with administrative guidance excluding detention charges from service tax.