Freight forwarders who act as agents or intermediaries of airlines or ocean-liners for transportation of goods outside India are liable to pay service tax, said the Revenue Department.
However, the Central Board of Excise and Customs (CBEC) clarified that freight forwarders who are engaged in overseas transportation of goods on their account and bear all risks do not fall in the ambit.
“When the freight forwarder acts as an agent of airline/carrier/ocean-liner, the service of transportation is provided by the airline/carrier/ocean-liner. And the freight forwarder is merely an agent and the service of freight forwarder will be subject to tax…,” it said.
With regard to freight forwarder who acts as ‘principal’ and provides overseas transportation services independently and bear all related risks “will not be liable to pay service tax when the destination of the goods is from a place in India to place outside India”.
The department issued the clarification in view of the representation it received from stakeholders on transportation of goods outside India.
As per the rules, the place of provision of the service of transportation of goods by air/sea, other than mail or courier, is the destination of the goods.
So, when a goods are transported overseas, the place of taxation falls outside the taxable territory and hence cannot be taxed.