SERVICE TAX ON OCEAN FREIGHT –BUDGET 2016 –IMPACT ON IMPORT – POST MAY 30, 2016:
(Ref: Section 66D of the Finance Act 1994,Notification 25/2012,Notification 9/2016,CENVAT Credit Rules 2004,Notification 13/2016, D.O.F. No.334/8/2016-TRU)
Inbound ocean freight has been made liable to service tax vide budget 2016. Few of important points in this regard have been summarized here:
Apart from other items the following item is covered in the negative list under Section 66 D of the Finance Act, 1994 and hence not liable to service tax:
Services by way of transportation of goods—
(i) by road except the services of—
(A) a goods transportation agency; or
(B) a courier agency;
(ii) by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or
(iii) by inland waterways
Vide clause 146 of the Finance Bill, 2016, the entry (ii) above is proposed to be omitted from 01.06.2016. Hence, from 01.06.2016, services by way of transportation of goods, by an aircraft or a vessel from a place outside India upto the customs station of clearance in India, would be liable to service tax. Various amendments have been carried out in Notification 25/2012 ST Dt. 20.06.2012 which provides for various exemptions from payment of service tax vide Notification 9/2016 ST DT. 01.03.2016. The following exemption has been introduced with effect from 01.06.2016. 53. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.
W.e.f 1st June 2016 in case ocean freight is paid to the transporter based in India, following ST will be charged:
|
Sr. No. |
Particular |
Tax rate till 30th May 2016 |
Tax Head w.e.f 1st June 2016 |
Tax Rate |
|
1. |
Tax on import freight |
NIL-No tax on Ocean freight |
Service Tax (Abatement @70%) Swachh Bharat Cess Krishi Kalyan Total Tax |
4.2% 0.15% 0.15% 4.5% |
In case transporter is based out of India, the service tax on ocean freight has to be paid by the importer under reverse charge basis.
As per para 4.1 of the D.O.F. No.334/8/2016-TRU dated 29th Feb’2016 The service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfillment of the other existing conditions). It is clarified that service tax levied on such services shall not be part of value for custom duty purposes. In addition, Cenvat credit of eligible inputs, capital goods and input services is being allowed for providing the service by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India.
