1. Attention of the Trade is invited to this office Trade Notice No. 38-CE (Service Tax)/97, dated 9-6-1997 by which it was informed about the imposition of service tax on the services rendered by Custom House Agents and Steamer Agents w.e.f. 15-6-1997 in terms of Notification No. 17/97-Service Tax, dated 6-6-1997 — Govt. of India, Ministry of Finance, Department of Revenue.
2. It is felt that some clarifications in respect of these two services given below for guidance of Public/Trade would be beneficial.
Custom House Agents
2.1. The expression "custom house agent" has been defined to mean a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962. A person is permitted to operate as a custom house agent, temporarily under regulation 8(1) and permanently under regulation 10 of the Customs House Agents Licensing Regulations, 1984.
2.2 As per the Finance Act, 1997, the taxable service rendered by a custom house agent means any service provided to a client by a custom house agent in relation to the entry or departure of conveyances of the import or export of goods. The value of the taxable service in relation to the service provided by a custom house agent to a client has been defined to constitute the gross amount charged by such agent from the client for services rendered in any manner in relation to import or export of goods. The service tax is chargeable at the rate of 5% on the value of the taxable service.
2.3 The service rendered by the custom house agent are not merely limited to the clearing of the import and export consignment. The CHA also renders the service of loading/unloading of import or export goods from/at the premises of the exporter/importer, the packing weighment, measurements of the export goods, the transportation of the export goods to the customs station or the import goods from the customs station to the importer's premises, carrying out of various statutory and other formalities such as payment of expenses on account of octroi, destuffing/pelletisation terminal handling, fumigation, drawback/DEEC processing, survey/amendment fees, dock fees, repairing and examination charges, landing and container charges, statutory labour charges, testing fees, drug control formalities, sorting/making/stamping/sealing on behalf of the exporter/importer. The Custom House Agent also incurs various other expenses such as crane/fork- lift charges, taxi charges, photostat and fax charges, bank collection charges, courier service charges, and miscellaneous other expenses on account of the exporter/importer. For all the above charges the CHA is ordinarily reimbursed by the importer/exporter for whom the above services are rendered. Apart from the above charges, the CHA also charges the client for his service under the head/nomenclature of agency and attendance charges or similar kind of heads which is purported to be his service charge in respect of the services rendered in relation to the import/export goods.
2.4 It is clarified that in relation to Custom House Agent the Service Tax is to be computed only on the gross service charges, by whatever head/nomenclature, billed by the custom house agent to the client. It is informed that the practice obtaining is to show the charges for service as "agency commission", "charges", "agency and attendance charges", "agency charges" and some similar descriptions. The service tax will be computed only with reference to such charges. In other words, payments made by CHA on behalf of the client, such as statutory levies (cess, customs duties, port dues etc.) and various other reimbursible expenses incurred are not to be included for computing the service tax.
2.5 In many cases the customs house agent undertakes "turnkey" imports and exports where a lump sum amount is charged from the client for undertaking various services. In these cases, the lump sum amount covers not only the "agency commission" fee but also other expenses and no separate break-up is given in respect of these expenses. It has been decided that in such cases, the value of the taxable service tax shall be 15% of the lump sum amount charged to the client. The custom house agents, may be advised to show the service charges at 15% of the such lump sum amount of the bills. Service tax of 5% will be chargeable on the above 15%.
2.6 Sometimes CHAs sub-contract their work to CHAs located in other station. In such cases, it is possible that the sub-contracting CHA raises the bill on the main CHA who in turn raises the bill to the client. It has been decided that in such cases the sub-contracting CHA will not be required to pay service tax on the bills raised by him on the main CHA. The service tax will be payable by the CHA who provides the actual service to the client and raises the bill to the client.
2.7 A CHA may have various branch offices located at different stations but all these branch offices do not raise the bills and only the main or central office will be raising the bill. In such cases, only the central office should be registered with the Deptt. The Commisssioners of Central Excise may verify any such contention and allow the payment to be made by Head Office.
2.8 Sometimes the bills raised by the CHA are not entirely paid by the client and the CHA is forced to give discounts. In such cases where the final bill raised is lower than the initial bill, it may be mentioned that the law provides for claiming of refund of excess service tax paid within six months from the date of payment of tax. If the CHA can produce evidence of having charged less service fee, he may claim refund of excess service tax paid, if any, as per the provisions of law.
Steamer Agents
3.1 The expression 'steamer agent' has been defined to mean any person who undertakes, either directly or indirectly,—
(a) to perform any service in connection with the ship's husbandry or dispatch including the rendering of administrative work related thereto; or
(b) to book, advertise or canvass for cargo for or on behalf of a shipping line; or
(c) to provide container feeder services for or on behalf of a shipping line;
3.2 The taxable service provided by a steamer agent to a shipping line, is the service provided by a steamer agent in relation to a ship's husbandry or dispatch or any administrative work related thereto as when as the booking, advertising or canvassing of cargo, including container feeder services. The value of the taxable service in relation to services provided by a steamer agent to a shipping line, shall be the gross amount charged by such agent from the shipping line for services in relation to a ship's husbandry or dispatch or any administrative work related thereto or in relation to the booking, advertising, or canvassing of cargo, container feeder services including the commission paid to such agent.
3.3 Steamer agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to port authorities and transporters such as CONCOR/railways, private transporters, chartered accountants fee, Income Tax, brokerage paid on export cargo, ship handling expenses paid to stevedoring agents. For all the above charges the steamer agent is ordinarily reimbursed by the shipping line. Further, the steamer agent bills the principals i.e. the shipping line, for two types of service charges. One is called the husbandry fee which they charge for a ship's husbandry. The second is the agency commission which is paid by the shipping line on the import and export cargo. These commission are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the steamer agent and shipping line.
3.4 It is clarified that in relation to the steamer agent the service charges will constitute the husbandry fee as well as the agency commission on import/export cargo. Other expenses incurred by the steamer agent on behalf of the shipping line shall not be taken into account.
3.5 It has been represented that the accounting for purposes of service tax should be on per voyage, per vessel basis and further that the registration for service tax purposes should be done only of their sea port offices. It has been decided that only such sea port offices of the steamer agent should be registered for service tax purpose which are raising the bill to the shipping lines. The branch offices in ICDs which are just sales offices and do not raise any bills to the shipping line, need not be registered. This is for the reason that billing is done by the sea port offices and not the branch offices.
4. Miscellaneous
4.1 It may be mentioned that the provision of Section 68 and 76 of the Finance Act, 1994, as amended by the Finance Act, 1997 will also come into force from 15th June, 1997. Section 68(2) of the Finance Act, 1994 provides that the service tax collected during a month shall be deposited to the Government account by the 15th of the succeeding month, Section 68(3) of the Finance Act, 1994 as amended provides that a person responsible for collecting the service tax who fails to collect such tax shall be liable to pay such tax to the Government within 75 days from the close of the month in which the service was rendered. Section 76 further provides that in case of failure to pay the tax within the period of 75 days the person responsible for collecting the service tax shall in addition to the tax and interest payable thereon be liable to pay a penalty.
4.2 As per Section 69 of the Finance Act, 1994 read with Rule 3 and 4 of the Service Tax Rules, 1994, every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under Rule 3, Notification No. 18/97-Service Tax, dated 6-6-1997 amends Rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the service provided by a CHA or a steamer agent shall be the CHA or the steamer agent, as the case may be, who raises the bill for services rendered and shall include each of the offices of such agents which raise the bill for services rendered to their client or their principal, as the case may be.
4.3 Rules relating to service tax on other services have already been notified and the trade is advised to go through them.