Issues related to levy of service tax on the services provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India to the customs station in India - Service Tax - TRADE NOTICE No. 02/2017- SERVICE TAX

GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER CENTRAL EXCISE SERVICE TAX, GUWAHATI SETHI TRUST BUILDING, 5 th FLOOR, G.s. ROAD, BHANGAGARH GUWAHATI - 781 005 C. No. IV(16)02/Trade Notice/ST/HQRS/GHY/2017/2040-78 Dated- 08/05/2017 TRADE NOTICE No. 02/2017- SERVICE TAX Sub:- Issues related to levy of service tax on the services provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India to the customs station in India - reg. Attention of the members of trade and industry and all concerned is hereby invited to Notification No. 1/2017-ST dated 12th January, 2017, whereby service tax exemption was withdrawn for services provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. Further, in relation to such services, the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods, was notified as the person liable to pay service tax vide notification No. 2/2017 and 3/2017ST both dated 12th January, 2017. 2. Several representations have been received seeking clarification on levy of service tax on the services provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a imported goods as determined under Section 14 of the Customs Act, 1962 and the rules made thereunder. 3.1 In addition, Swachh Bharat Cess and Krishi kalyan Cess will be paid accordingly [ST @1.4% of Customs value of goods, Swachh Bharat Cess and Krishi Kalyan Cess each @ 0.05% of Customs value of goods]. 3.2 This option has been made available with effect from 22nd January, 2017. 4. It is pertinent to point out here that under notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfillment of the condition that Cenvat credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. This conditional exemption has been extended for the reason that out of the full value of such services, the exempted value of service has already suffered taxes (Central Excise) which would have been available as Cenvat credit to set off service tax on full value of service. In effect, service tax is levied on the value added only. However, in case of foreign shipping lines, their services being exports from their home country, are zero-rated in their home country and thus have suffered no taxes. Further the foreign shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules. 4.1 Thus, the condition for availing exemption under notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10) is not fulfilled by the foreign shipping lines. Hence, benefit of conditional exemption will not be available to them and service tax will be paid on full value of services. Further, the amount of service tax payable under the option available under Service Tax Rules, 1994 has been prescribed accordingly. Authority: : File No. 354/42/2016-TRU Circular No. 206/4/2017- Service Tax dated- 13/04/2017 (VINEY KUMAR PAUL) COMMISSIONER