Intermediary Freight forwarders liable to pay Service Tax: CBEC [Read Circular]

In a recent circular dated August 12th 2016 issued by Central Board of Customs and Excise (CBEC) has clarified that, Freight forwarders dealt with the exporters who act as agents or intermediaries of airlines or ocean-liners for transportation of goods outside India are liable to pay service tax.

The department issued the clarificatory circular based on the representation received from stakeholders on transportation of goods outside India.

The term ‘intermediary’ has been defined in the rule 2(f) of the Place of Provision of Services Rules 2012.

When the freight forwarder acts as an agent or intermediary 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 or intermediary 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, said in the circular.

When the Freight forwarders act as a principal who is providing the service of transportation of goods, 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, it also added.

Read the full text of the circular below.

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