Service Tax on services rendered by clearing and forwarding agents and rent-a-cab scheme operators - Service Tax - 87/97 (10/Service Tax/97) - Madurai - II

Attention of the Trade is invited to Madurai Commissioner s Trade Notice No. 27/97 (04/Service Tax/97), dated 4-3-1997 wherein it was informed that the Finance Bill, 1997 - 1998 proposed [to] extend levy of Service Tax on new services. Of the new services proposed in the Finance Bill, 1997 - 1998, the services rendered by clearing and forwarding agents and rent-a-cab scheme operators have now been brought under Service Tax net vide Section 88 of the Finance Act, 1997 w.e.f. 16-7-1997. Notification Nos. 26/97-S.T. and 27/97-S.T. , both dated the 11th July, 1997 have been issued in this regard. 2. Clearing and Forwarding Agents 2.1 Clearing and forwarding agent has been defined as any person who is engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consigning agent. The taxable service has been defined as any service provided to a client, by C F agent in relation to clearing and forwarding operations in any manner. The clearing and forwarding agents are engaged/appointed by manufacturer of goods (both excisable and non-excisable goods), producers and distributors of goods and shall also include such agents appointed for agricultural and mineral goods. 2.2 Normally, there is a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C F agent is entitled. A clearing and forwarding agent normally undertakes the following : (a) Receiving the goods from the factories or premises of the principal or his agents; (b) Warehousing these goods; (c) Receiving despatch orders from the principal; (d) Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal; (e) Maintaining records of the receipt and despatch of goods and the stock available at the warehouse; (f) Preparing invoices on behalf of the principal. 2.3 It has been decided that the person responsible for collecting the service tax in the case of services rendered by a clearing and forwarding agent shall be the person engaging/appointing a clearing and forwarding agent ( Notification No. 26/97-Service Tax refers). It may be noted that unlike in the case of other service tax levies where the service provider is the person responsible for collecting the service tax, in the case of services rendered by clearing and forwarding agents the service tax liability shall be discharged by the person availing the service so rendered. In other words, the principal who engages a clearing and forwarding agent is the person responsible for collecting and paying the service tax to the exchequer. 2.4 Further under the Finance Act, 1997 the value of taxable service rendered by a clearing and forwarding agent has been defined as the gross amount charged by such agent from the client for the services of clearing and forwarding operations in any manner. However, under Service Tax Rules it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent ( Notification No. 27/97-S.T. refers.) 2.5 For the services rendered, the C F agent receives commission or remuneration which usually consists of two components : (I) Minimum commission on a flat rate or turnover basis depending on the packages/consignments handled; (II) A variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal. This is usually given as a percentage of the turnover. The above two constitute the remuneration or commission paid to the C F agent by the principal. 2.6 In cases where C F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for service tax purposes it would suffice to register only such regional or head offices. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the service tax liability. 3. Rent A Cab Scheme Operators 3.1 As per Section 88 of the Finance Act, 1997, rent a cab scheme operator means a person who is the holder of a licence under the Rent-a-Cab Scheme, 1989 framed by the Central Government under the Motor Vehicles Act, 1988. A person is granted a licence by the State Transport Authority under Rule 6 of the Scheme. A licence is granted to a person who inter alia, maintains not less than 50 motor cabs having tourist permits issued under sub-section (9) of Section 88 of the Motor Vehicles Act. The Rent a cab scheme operators, under the scheme are mandatorily required to maintain branch offices or sub-licensee offices in at least five cities of tourist importance with facilities for housing, maintenance and repair of vehicles. 3.2 Under the Rent a cab Scheme 1989 the operator is required to maintain a register for each vehicle incorporating particulars as regards the hiring of the same in the format prescribed under the Scheme. Further, the operator under Rule 9 of the Scheme is required to collect hire charges from a foreign national or a non-resident Indian, only in foreign exchange. 3.3 The taxable service rendered by a Rent a cab scheme operator means any service provided to any person, by a Rent a cab scheme operator in relation to the renting of a cab. The rate of service tax is 5% and the value of taxable service in relation to the service provided by a Rent a cab scheme operator to any person, shall be the gross amount charged by such operator from such person for services in relation to the renting of a cab and includes such rental. 3.4 The value of taxable service in relation to the service provided by a Rent a cab scheme operator to any customer, shall be the gross amount charged by such operator from such customer for services in relation to the renting of a cab and include the rental so charged. Any other charges billed to the customer such as processing charges, administrative fees, charges for providing extra accessories or providing other value added services such as a provision of driver etc. shall also be includible in the gross amount chargeable to service tax. 3.5 However service tax will not be payable in cases where a bill has been raised on a Rent a Cab Scheme operator, by another Rent-a-cab scheme operator who has sub-let the motor cab to the latter operator provided who pays service tax on the amount billed to his client for renting out the motor cab so obtained by him. 4. General 4.1 As per Section 69 of the Finance Act, 1994 , read with Rules 3 and 4 of the Service Tax Rules, 1994 , every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under Rule 3. Notification No. 27/97-Service Tax, dated 11-7-1997 amends Rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the services provided by a clearing and forwarding agent shall be the person who engages a clearing and forwarding agent and by whom remuneration or commission (by whatever name called) is paid for such services to the said agent and the person responsible for collecting the service tax in relation to the services provided by a rent-a-cab scheme operator shall be the operator who raises the bill for services rendered to any person by such operator. 4.2 It has been decided that for all the Commissionerates, the concerned Commissioner having jurisdiction in Central Excise matters will have corresponding jurisdiction for service tax matters. This applies to Commissionerates in Mumbai and Calcutta as well. (Order No. 4/1/97-Service Tax (3), dated 11th July, 1997 refers.) 4.3 Rule 6 of the Service Tax Rules deals with the payment of service tax. State Bank of India is authorised to collect the service tax in this Commissionerate. A copy of T.R. 6 form (Challan) is enclosed for the purpose of deposit of service tax. 4.4 The Heads of Accounts for payment of service tax on the above services will be intimated in due course. 4.5 The assessees will apply for Registration in Form ST-1 . An acknowledgement will be provided on the duplicate copy of the ST-1 Form by the Superintendent of Central Excise in whose jurisdiction the assessees operate. The Registration Certificate will be granted in Form ST-2 within seven days from the date of the receipt on application for Registration. The quarterly return is in Form ST-3. 4.6 For the convenience of the assessee the following are enclosed: (i) Service Tax Rules, 1994 . (ii) Form ST-1 to ST-3. (iii) T.R. 6 Form (Challan) (iv) Copy of Notification Nos. 26/97-ST and 27/97-ST both dated 11th July 1997. (v) Order No. 3/3/94, dated 11-10-1994 and 4/1/97, dated 11-7-1997 issued under Service Tax Rule 3. 5. In case of any difficulty the assessees are requested to contact the jurisdictional Superintendent of Central Excise, or the Assistant Commissioner of Central Excise or this Office.