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Logistics And Service Tax By Mr Vaitheswaran
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Logistics And Service Tax By Mr Vaitheswaran



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  • 1. LOGISTICS & SERVICE TAX K. Vaitheeswaran Advocate & Tax Consultant
  • 2. LOGISTICS - STORAGE Storage and warehousing were subjected to tax from 16.08.2002. Includes storage of liquids and gases. Does not include storage of agricultural produce and cold storage services. Services to be provided is also taxable w.e.f. 16.06.2005.
  • 3. LOGISTICS - STORAGE Indian ship availing storage services abroad which are also consumed abroad are exempted (Notification 22/05) Board has clarified that handling/storage and warehousing of empty containers would also be covered as they are goods.
  • 4. LOGISTICS – C&F OPERATIONS Persons engaged in providing services directly or indirectly connected with C&F operations are covered. As per definition consignment agents are included. However, the definition of taxable service refers to C&F operations. Number of decisions to the effect that mere consignment agents and mere commission agents cannot be taxed under this category. (mere commission agents are liable under business auxiliary services) Reimbursement of expenses.
  • 5. LOGISTICS - GTA Services provided to a customer by a goods transport agency in relation to transport of goods by road in a goods carriage is covered. With effect from 01.01.2005 liability on the consignor or the consignee falling under specific categories. Where the consignor or consignee falls under the specific categories, GTA is not at all liable. Where freight is payable by consignee when it is on to pay basis, consignee is liable.
  • 6. LOGISTICS - GTA Lot of confusion in the Industry with some GTAs paying service tax by themselves. Concept of GTO / GTA. Tax is on 25% of the freight amount provided the GTA does not avail cenvat credit on inputs or capital goods or exemption in respect of materials. Declaration required. Issue of consignment note.
  • 7. LOGISTICS – STEAMER AGENTS Services in connection ship’s husbandry, dispatch, administrative work, booking cargo, container feeder services on behalf of a shipping line covered. Commission received from shipping line for freight forwarding (whether business auxiliary service ?)
  • 8. LOGISTICS – CUSTOMS HOUSE AGENTS Services provided in relation to entry or departure of conveyances / import or export of goods covered. Expenses on behalf of clients not taxable and only agency commission is taxable. Where breakup is not available 15% of lumpsum amount can be considered as commission.
  • 9. LOGISTICS – CARGO HANDLING Scope includes loading, unloading, packing, unpacking, cargo handling services for freight in special containers or for non-containerized freight, services of a container freight terminal, etc. Handling of export cargo, passenger baggage and mere transportation excluded from levy. As per clarification cost of transportation shown separately is excluded. Cargo handling in relation to agricultural produce and cold storage exempted.
  • 10. LOGISTICS - OVERLAPPING Overlapping of services such as clearing and forwarding agents, cargo handling agencies, goods transport agencies, customs house agents, port services, storage and warehousing services. Definition create complications and disputes. Gross Vs. Nett issue.
  • 11. OVERLAPPING OF SERVICES Storage and C&F / Cargo Handling P O GTA R WAREHOUSE T GTA Port Services FACTORY Transport Storage Customs
  • 12. LOGISTICS – AIR Air cargo services attract service tax. Exemption in respect of transport of export cargo by aircraft. Exemption not available for the period 14.03.2005 to 14.07.2005. Services provided by Airports attracts tax from 10.09.2004. Recent DGST order
  • 13. REVERSE CHARGE Ztore Inc provides warehousing services to Ganesh & Co. in US for onward delivery to customers in US. Ztore Inc has established a business or has a fixed establishment from which service is provided or to be provided or has its permanent address or usual place of residence in USA.
  • 14. REVERSE CHARGE Such service is received or to be received by Ganesh & Co. who has its place of business, fixed establishment, permanent address, or as the case may be usual place of residence in India. Such service shall be deemed to be a taxable service. Ganesh & Co. will have to register as a warehouse service provider and pay service tax on monies paid to Ztore Inc.
  • 15. REVERSE CHARGE Section 64 which is a charging Section provides that this chapter extends to be whole of India except the State of Jammu & Kashmir. Rule 2(1)(d)(iv) prior to 16.06.2005 read as “in relation to any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India, the person receiving taxable service in India.”
  • 16. REVERSE CHARGE Rule 2(1)(d)(iv) w.e.f. 16.06.2005 reads as under: “In relation to any taxable service provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided, or has his permanent address or usual place of residence, in a country other than India and such service provider does not have any office in India, the person who receives such service and has his place of business, fixed establishment, permanent address or as the case may be, usual place of residence in India.”
  • 17. ISSUES Whether “and” indicates satisfaction of two conditions or “and” indicates that service must be received in India. Section 9 of Income Tax Act, has a nexus to activities or assets or permanent establishment etc. in India.
  • 18. ISSUES Notification 25/2005 w.e.f. 16.06.2005 exempts taxable service provided to an individual by a service provider, where the taxable services are received and consumed outside India, by such individual, not in the course or furtherance of commerce or industry or any other business from the whole of service tax. Legislative intention to provide extended territorial jurisdiction without nexus to India.
  • 19. ISSUES Notification 22/2005 w.e.f. 16.06.2005 provides for exemption in respect of taxable services falling under customs house agents, steamer agents, C&F agents, port, cargo handling, storage, repair and maintenance, technical inspection, etc. provided by a non-resident person outside India and consumed outside India in the course of sailing of a ship.
  • 20. ISSUES Indian company appointing an agent for sales promotion in the UK. Indian company engaging a management consultant in US. Branch in New York engaging an architect for constructing a building in New Jersey. Construction company engaging an engineer in China for work at site in China.
  • 21. ISSUES Branch in Germany booking air tickets through an agent in Germany for employee travel to London. Project office director stationed in France getting his car serviced in France. Banking services availed in a foreign country. Laison office in Japan having an internet service provider in Japan.
  • 22. ISSUES IT company in India enrolling all its senior managers working in US at a fitness centre in US. Pre-shipment inspection carried out by foreign agencies prior to import. List is endless ……… Can an Indian law impose tax on a transaction between two parties completely outside India when there is no nexus to India ?
  • 23. Thank you K. VAITHEESWARAN Advocate & Tax Consultant Flat No.3, First Floor, No.9, Thanikachalam Road, T. Nagar, Chennai - 600 017. Mobile: 98400-96876 E-mail :