Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

OVERVIEW OF PLACE OF PROVISION ON LOGISTICS INDUSTRY



Generally, an “intermediary” is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, an intermediary is involved with two supplies at any one time:
i) The supply between the principal and the third party; and
ii) The supply of his own service (agency service) to his principal, for which a fee or commission is usually charged.
For the purpose of this rule, an intermediary in respect of goods (such as a commission agent i.e. a buying or selling agent or a stockbroker) is excluded by definition. Also excluded from this sub-rule is a person who arranges or facilitates a provision of a Service (referred to in the rules as “the main service”), but provides the main service on his own account.
In order to determine whether a person is acting as an intermediary or not, the following factors need to be considered:-

  • Nature and value:An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. 
  • Separation of value:The value of an intermediary’s service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as “commission”. 
  • Identity and title:The service provided by the intermediary on behalf of the principal is clearly identifiable.


In accordance with the above guiding principles, services provided by the following persons will qualify as ‘intermediary services’:-

i.         Travel Agent (any mode of travel)
ii.        Tour Operator
iii.      Commission agent for a service [an agent for buying or selling of goods is excluded]
iv.      Recovery Agent
Even in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him. To act on behalf of the provider of the ‘main service

ILLUSTRATION

A freight forwarder arranges for export and import shipments. There could be two possible situations here-one when he acts on his own account, and the other, when he acts as an intermediary:

When the freight forwarder acts on his own account (say, for an export shipment) A freight forwarder provides domestic transportation within taxable territory (say, from the Exporter’s factory located in Pune to Mumbai port) as well as international freight service (say, from Mumbai port to the international destination), under a single contract, on his own account (i.e. he buys-in and sells fright transport as a principal), and charges a consolidated amount to the exporter. This is a service of transportation of goods for which the place of supply is the destination of goods. Since the destination of goods is outside taxable territory, this service will not attract service tax due to export of goods. Here, it is presumed that ancillary freight services (i.e. Services ancillary to transportation- loading, unloading, handling etc.) are “bundled” with the principal Service owing to a single contract or a single price (consideration).On an import shipment with similar conditions, the place of supply will be in the taxable territory, and so the service tax will be attracted. For more information : new company registration India

When the freight forwarder acts as an intermediary:

Where the freight forwarder acts as an intermediary, the place of provision will be his location. Service tax will be payable on the services provided by him.However, when he provides a Service to an exporter of goods, the exporter can claim refund of service tax paid under notification for this purpose.

Particular
Prepaid Shipment
Collect Shipment




In case of Import

Service performed outside India by foreign agent
Service performed in  India by Indian logistic company
Non taxable

Taxable

Service performed outside India by foreign agent
Service performed in  India by Indian logistic company
Service given to foreign agent related to collection of revenue
Non taxable

Taxable
Taxable





In case of Export
Service performed outside India by foreign agent
Service performed in  India by Indian logistic company
Non taxable

Taxable
Service performed outside India by foreign agent i.e. destination
Service performed in  India by Indian logistic company i.e. origin
Service provided by foreign agent related to collection of revenue
Non taxable

Taxable
Taxable



·         Service–Clearing and Forwarding
·         Service Provider–Freight Forwarder
·         Place of Provision-Location of service provider (as intermediary)
·         Value of taxableService–As per valuation Rule 6(8) of service tax rules ,1994 read with sec 67 of Finance Act,1994,Gross amount  of remuneration or commission i.e. reimbursements  expenses on actual basis not liable to service tax (As decided case of Sangamitra services agency June 27,2013, H.C.)

Share the post

OVERVIEW OF PLACE OF PROVISION ON LOGISTICS INDUSTRY

×

Subscribe to Best Service Tax Consultants In Delhi, Company Formation, Company Registration And Tds Return : Nbfc Registration

Get updates delivered right to your inbox!

Thank you for your subscription

×