Service Tax — Clearing and forwarding agent - Service Tax - F. No. 341/11/98

Service Tax Clearing and forwarding agent F. No. 341/11/98, TRU Dated 23-8-1999 I am directed to invite your attention to Section 68 (2) of the Finance Act, 1994 which, inter alia provides for payment of service tax by a person other than the person providing taxable service. You may be aware that in respect of services rendered by clearing and forwarding agent, the service tax was made payable by the person engaging such agent vide sub-clause (iii) of Clause (d) to Section 2(1) of Service Tax Rules, 1994. 2. You may also be aware that in the case of Laghu Udyog Bharati Anr. v. Union of India and Others in Writ Petition No. 53 of 1998 [1999 (112) E.L.T. 365 (S.C.)], the Hon'ble Supreme Court had passed an order holding that the sub-rules (xvii) and (xii) of Rule 2(1)(d), insofar as it makes person other than the clearing and forwarding agent or the person other than the goods transport operator as being responsible for collecting service tax are ultra vires to the Finance Act, 1994 itself. It may be noted that the sub-rule (xvii) was omitted as the levy on the service rendered by goods transport operator was removed from the scope of levy of service tax in 1998 budget. The sub-rule (xii) relating to services provided by clearing and forwarding agent, is continued as sub-rule (iii) of Service Tax Rules, 1994 (in the amended form) vide Notification No. 54/98-S.T., dated 7-10-1998, which came into effect from 16-10-1998. 3. It has been decided now, to do away with the above method of payment of service tax by an alternate person other than the person providing the taxable service in respect of clearing and forwarding agents. In other words, the clearing and forwarding agents will henceforth pay the service tax in respect of taxable services rendered by them. Accordingly Notification No. 7/99-S.T., dated 23rd August, 1999 has been issued in this regard (copy enclosed). This will come into force with effect from 1st September, 1999. 4. It may be noted that the value of taxable service rendered by clearing and forwarding agent continue to remain as the gross amount of remuneration or commission (by whatever name called) paid to such agent by the principal or the client engaging such agent as provided under sub-rule (8) to Rule 6 of the Service Tax Rules, 1994. 5. The provisions relating to registration furnishing of returns and assessment as in existence will continue to apply on the clearing and forwarding agents who will now be liable to pay the service tax as per Section 68(1). The Commissioners should issue suitable trade notices for information and guidance of the trade. The trade notices may include the procedure to be followed for registration, maintenance of documents, filing of returns and manner in which the service tax is to be paid. The trade notice should provide complete information and guidance to the assessees and they should be selfcontained in all respects. The field officers are also requested to kindly provide all assistance and guidance to the assessees in explaining the provisions of service tax and in clarifying their doubts. All possible steps may kindly be taken by the Commissioners to facilitate smooth implementation of the levy of service tax on the clearing and forwarding agents.