Covers the recent withdrawal of exemption of applicability of service tax on inbound cargo services

1. SNR
& company
chartered
accountants
ST/2017/1
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Service Tax Alert
Recently Government of India has
withdrawn the exemption granted to
transportation of goods through vessel upto
custom station of clearance in India
(
) and made the
captioned service taxable and the onus of
tax payment has been cast on to the person
who is completing custom formalities for
clearance of goods i.e. the service receiver
under reverse charge. We have analyzed
the relevant provisions including CBEC
clarifications issued on the subject.
Inbound Cargo transportation or
Import Cargo services
As per the charging Section 66B of the Finance Act, 1994, service tax is leviable on services
provided or agreed to be provided in the taxable territory. Place of provision of services is
determined as per Section 66C of the Finance Act, 1994 and the Place of Provision of
Services Rules, 2012 made thereunder.
Inbound cargo transportation services are covered under rule 10 of the Place of Provision of
Services Rules, 2012 and the place of provision of such services is the destination of the
goods and thus they are taxable in India. However, they were exempted from Service Tax vide
Entry Number 34 of Notification 25/2012 (Mega Exemption Notification).
With the release of Notification No. 01/ 2017 dated 12.01.2017, amendment has been made
stating that the exemption under Entry Number 34 would not be applicable to: “Services by
way of Transportation of goods by a vessel from a place outside India up to the customs
station of clearance in India' (i.e. inbound cargo transportation or Import cargo). This
notification has been made effective from 22nd January, 2017.
Changes in Service Tax on Inbound Cargo Services
Further, notification No. 30/2012-Service Tax has been amended to provide that service tax
would be payable under reverse charge basis by the person in India who complies with
sections 29, 30 or 38 read with section 148 of the CustomsAct, 1962 (52 of 1962) with respect
to such goods. It implies the person liable to pay service tax would be the person who is
responsible for the entering of the vessel at the customs port and delivery of import manifest to
the Proper Officer.

2. SNR
& company
chartered
accountants
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Service Tax Alert
ST/2017/1
CBEC has further issued circular No.204/2/2017 dated 16th February, 2017 clarifying that
transportation services pertaining to goods imported into a customs station in India intended
for trans-shipment to any country outside India would not be leviable to service tax.
Source:
Mega Exemption-
Notification no. 02/2017-
Notification no. 03/2017-
Clarification-
http://www.cbec.gov.in/htdocs-servicetax/st-notifications/st-
notifications-2012/st25-2012
http://www.cbec.gov.in/resources//htdocs-servicetax/st-
notifications/st-notifications-2017/st01-2017.pdf
http://www.cbec.gov.in/resources//htdocs-servicetax/st-
notifications/st-notifications-2017/st03-2017.pdf
http://www.cbec.gov.in/resources//htdocs-servicetax/st-circulars/st-
circulars-2017/st-circ-204-2-
2017.pdf;jsessionid=4A047F298823F1320360927BB58E6EFF