NO:CLE-HO/POL/CIRCULAR/2016
Sept. 2, 2016

Members of the Council,
Sub : Service Tax on Freight Forwarders on Transportation of Goods from India

Dear Sirs,

The Central Board of Excise and Customs has issued a Service Tax circular No.197/7/2016 dated 12th Aug 2016 (copy enclosed) regarding service tax on freight forwarders on transportation of goods from India. The highlights are as follows.
When the freight forwarder acts as an agent of an airline/carrier/ocean liner, the service of transportation is provided by the air line/carrier/ocean-liner and the freight forwarder is merely an agent and the service of the freight forwarder will be subjected to tax while the service of actual transportation will not be liable for service tax under Rule 10 of POPs.

The freight forwarders may also act as a principal who is providing the service of transportation of goods, where the destination is outside India. In such cases the freight forwarders are negotiating the terms of freight with the airline/carrier/ocean liner as well as the actual rate with the exporter. The invoice is raised by the freight forwarder on the exporter. In such cases where the freight forwarder is undertaking all the legal responsibility for the transportation of the goods and undertakes all the attendant risks, he is providing the service of transportation of goods, from a place in India to a place outside India. He is bearing all the risks and liability for transportation. In such cases they are not covered under the category of intermediary, which by definition excludes a person who provides a service on his account.

It follows therefore that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods is from a place in India to a place outside India.”

Members may kindly note the above.

Thanks & regards,
R.Ramesh Kumar
Executive Director
COUNCIL FOR LEATHER EXPORTS

Circular