TAXABILITY OF STEAMER AGENT’S SERVICES

[Dr. Sanjiv Agarwal]

Service tax has been imposed on steamer agent services with effect from 15th June, 1997 vide Notification No. 17/97-ST, dated 6th June, 1997. The gross amount charged or total consideration received by such agent from a shipping line including commission paid to such agent shall be chargeable to service tax.

Meaning of Ship

Section 65(96) defines ‘ship’ as under —

“ship” means a sea-going vessel and includes a sailing vessel.

As per Section 65(96), ship has been defined as a sea-going vessel and includes a sailing vessel. It means any vessel which goes to sea or is seaworthy and sailing for the purposes of carrying goods or persons.

General Clauses Act, 1897 defines ship to include every description of vessel used in navigation not exclusively propelled by oars. Indian Lighthouse Act, 1927 defines ship to include a sailing vessel but according to Merchant Ship Act, ship does not include a sailing vessel.

Meaning of Shipping Line

Section 65(97) defines ‘shipping line’ as under —

“shipping line” means any person who owns or charters a ship and includes an enterprise which operates or manages the business of shipping.

As per Section 65(97), shipping line has been defined to mean any person who owns or charters a ship and includes an enterprise which operates or manages the business of shipping. Any person would also include firm or company or other enterprise engaged in the shipping business.

Meaning of Steamer Agent

Section 65(100) defines ‘steamer agent’ as under —

“steamer agent” means any person who undertakes, either directly or indirectly —

(i) to perform any service in connection with the ship’s husbandry or dispatch including the rendering of administrative work related thereto; or

(ii) to book, advertise or canvass for cargo for or on behalf of shipping line; or

(iii) to provide container feeder service for or on behalf of a shipping line.

As per Section 65(100), steamer agent is a person who undertakes the following activities or services, directly or indirectly —

(i) to perform any service in connection with the ship’s husbandry or despatch including the rendering of administrative work related thereto, or

(ii) to book, advertise or canvass for cargo for or on behalf of shipping line,

(iii) to provide container feeder services for or on behalf of a shipping line.

Thus, a steamer agent should engage himself or itself in one more of the aforesaid activities to be called a steamer agent.

The basic tests of a steamer agent are —

(a) steamer agent must be a person.

(b) services provided should be as per (i), (ii), (iii) above.

(c) such services can be provided directly or indirectly.

Meaning of Vessel

Section 65(118) defines ‘vessel’ as under —

“vessel” has the meaning assigned to it in clause (z) of Section 2 of Major Port Trust Act, 1963.

As per Section 65(118), vessel has been defined in the Major Port Trust Act, 1963 as any vessel or equipment made for the purpose of conveyance of human beings or goods and a caisson, mainly by water vessel would include a ship.

Taxable Service

As per Section 65(105)(i) defines ‘taxable service’ as under —

“taxable service” means any service provided or to be provided to a shipping line, by a steamer agent in relation to a ship’s husbandry or dispatch or any administrative work related thereto as well as booking, advertising, canvassing of cargo, including container feeder services.

Ship husbandry implies managing the ship and doing whatever is necessary to enable the ship to prosecute voyage and earn freight. Agent looks after the repair, insurance, equipment, management, etc., of ships. He deals with cargo, both for exports and imports including dispatch details, submitting papers to customers, arranging for loading and unloading of cargo, arranging berth at port, preparing list of details, arranging shed or warehouse, cargo records, receiving cargo, issuing shipping bill, paying taxes, prepare list of consignments, etc.

Taxable services should meet the following conditions—

(a) Services, should be provided or agreed to be provided to a shipping line.

(b) Services should be provided or agreed to be provided by a steamer agent.

(c) Services should be in relation to—

(i) Ship’s husbandry, or

(ii) dispatch, or

(iii) any related administrative work, or

(iv) booking, advertising or canvassing of cargo,

(v) container feeder services.

(d) such services (as per (c) above) may be rendered directly or indirectly.

Value of Taxable Service

It had been 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.

Steamer agents incur various types of expenses on behalf of the shipping line such as pilotage and berth charges, Indian Coast Lines 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 principal 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. This commission is 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. In relation to the steamer agent the service charges will constitute the husbandry fees 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. (Source: Trade Notice No. 39-CE (ST-39)/97, dated 11-6-1997)

The container handling service rendered by the steamer agents are liable to service tax. Service tax is payable on the commission retained by the steamer agent and not on the total freight charges.

Many times, agents book en-block space in the ship and undertake to pay the freight for the said space to the shipping line irrespective of whether the cargo is booked by him or not. If such agent deals directly with the shipping line and retains any commission out of amount collected by him, the same will be liable for payment of service tax. However, if such agents deal with the agent of shipping line, service tax will not be liable on the agent making en-block booking. In such case, the agent of shipping line will be liable for payment of service tax. The agent making en-block booking will receive the amount from the booking agent of shipping line and not from the shipping line.

In International Clearing and Shipping Agency v. CCE, Chennai (2007) 5 STR 107; (2007) 8 STJ 388 (CESTAT, Chennai) where amount was collected by assessee in its capacity as steamer agent and custom house agent and accounted for in balance sheet as operational surplus and which comprised realisation in excess of actual expenses like lift on/off/storage/transportation/survey/monitoring services etc., it was held that amounts accumulated as surplus were balance of amounts collected in advance from clients towards various activities and prima facie, not remuneration for services rendered by assessee to its clients. As such, pre-deposit was waived.

Specific Exemption

Services provided by non-resident persons outside India and consumed outside India in the course of sailing of ship registered under specified relevant Acts in India and where such ship is owned/chartered by an Indian citizen/company/cooperative are exempt from service tax provided that such services relate to handling or ships in ports outside India, handling or storage of goods carried in ship in a port outside India or other services related to handling of ships or goods carried out in ships (vide Notification No. 22/2005-ST dated 7.6.2005).

This notification has been rescinded vide Notification No. 14/2006-ST dated 19-4-2006.

Person Liable

Any person being a steamer agent who renders services to a shipping line shall be liable to pay service tax and be treated as an assessee for service tax purposes.

 

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