Service tax applicability - Service tax amount

[Asked by Guest]

A Pvt. Ltd. company is engaged in the business of providing service relating to custom clearing and freight forwarding. It do not have any license to work as CHA under customs Act. It engages the services of CHA's to get the work done of its clients. CHA's raises bill on this company which includes agency charges and other expenditures like examination fee, labour charges, documentation fees, transportation etc. The CHA's charge service tax only on the agency charges and not on other expenditures mentioned above. In turn it raises the bill on its customers by marking up in each of the expense head contained in the bill of CHA. Further, it also provides the freight forwarding service by hiring vassels from shipping line companies. Now the following question arises:- 1. Do this company requires to be registered under Service Tax. If yes, under which category. 2. While billing, It should charge service tax on whole of the bill or only on agency charges as done by CHA's. 3. Wheterh service tax is applicable on freight forwarding services. 4. If yes. Should it charge service tax on whole of he freight collected from its customers which includes freight paid to the shipping line also.

[Surender Gupta]

The services described above are liable to tax either under "Clearing and Forwarding Agency services" or "Business Support Services". Various expenses incurred by the CHA are liable to be included in the value of taxable services. However, if you incure these expenses in the capacity of "pure agent" and have valid proof, in such case you are not required to pay service tax on the expenditures mentioned in the query. Further, the CHA is liable to pay service tax on freight forwading services if he is qulaifing the conditions for that.

AI Summary

Service tax on clearing and forwarding: recharged expenses included unless recharged as pure agent with proof.
Activities of customs clearing and freight forwarding are taxable as Clearing and Forwarding Agency Services or Business Support Services; CHA-incurred expenses recharged to clients are includible in the taxable value unless recharged as a pure agent with valid proof; freight forwarding is taxable where the provider meets the conditions for freight forwarding services and the tax treatment of freight charged to customers depends on agency status and applicability of the pure agent exclusion.