Service Tax "Valuation of Taxable Service" - Inclusion of Reimbursable Expenditure - Reg - Service Tax - C.No.III/10/1325/07-IA

Service Tax "Valuation of Taxable Service" - Inclusion of Reimbursable Expenditure - Reg THE COMMISSIONER OF SERVICE TAX MHU COMPLEX, 692, ANNA SALAI NANDANAM, CHENNAI 600 035. C.No.III/10/1325/07-IA Dated: 07.12.2007 Sub: Service Tax "Valuation of Taxable Service" - Inclusion of Reimbursable Expenditure - Reg Reference is invited to provisions of Service Tax Determination of Value Rules, 2006 which came into force with effect from 18.04.2006. The above Rules, inter alia, specify that the expenditure or costs incurred by the service providers as a Pure Agent of the recipient of service shall be excluded from the value of taxable service if all the eight conditions specified under Rule 5 (2) are satisfied. Pure Agent is defined under Explanation I and illustration of cases not covered under Pure Agent are specified under Explanation II to the above Rule. The Central Board of Excise and Customs vide Circular F.No.B1/4/2006-TRU dated 19.04.2006 has clarified that in view of the comprehensive provisions on Value of Taxable services, all the circulars issued relating to value of taxable services are withdrawn. 2. During the course of audit of some of the Custom House Agents, it is noticed that some of the Custom House Agents are not following the provisions of Valuation Rules cited above in spite of the clear cut provisions and clarifications issued by CBEC. For example the following reimbursable expenditures are not covered under the ambit of Pure Agent category:- 1. Documentation Charges 2. Forms and Stamp Charges 3. Postage / Courier Charges 4. Fax Charges 5. Telephone Charges 6. Conveyance 7. Transportation Charges 8. Consolidation Charges 9. Palletization Charges 10. Container Weighment Charges 11. Fuel Surcharges 12. Security Charges 13. Stuffing Charges 14. Seal Fee Charges 15. B.L Charges 16. Washing Charges 17. Storage Charges 18. Trucking Charges 19. X-Ray Charges 20. Empty Container Return Charges 21. Loading and Unloading Charges 22. Halting Charges 23. Shipment Expenses 24. Vehicle Parking Charges 25. Delivery Charges 26. Incidental Expenses 27. Steamer Agent Charges 28. LCL / FCL Charges 29. DO Charges 30. Customs Examination Charges 31. Fumigation Expenses 32. Survey Charges 33. Port Charges 34. Terminal Handling Charges 3. It may be seen from the nature of reimbursable expenditure given above that these are not covered under "Pure Agent" category as the Custom House Agent is utilizing the above services for providing their output service. In some cases it is also noticed that the Custom House Agents are collecting extra amount over and above the expenditure and thus the assessee ceases to be Pure Agent as they are violating one of the eight conditions of Rule (2) of Valuation Rules. It is, therefore, requested that the provisions of Valuation Rules and the Board's clarification may be brought to the notice of the members of your association as well as non members so as to enable the assesses to discharge their tax liability correctly and also to avoid payment of interest and penalty for short payment of Service Tax. 4. Receipt of this letter may please be acknowledged. Sd/- (P.K. JAIN) COMMISSIONER