Indian Service Tax
Cargo Handling Service
Effective Date 16/08/2002
Authority Notification No. 8/2002-ST dt. 1/8/2002 (for full text of Notification
see under'Beauty Parlour').
Rate of Service Tax 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Definition
"Cargo Handling Service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal; for all modes of transport and cargo handling service incidental to freight, but does not include handling of export. cargo or passenger baggage or mere transportation of goods; [Section 65(23)].
Taxable service Cargo handling services provided by the cargo handling agent in relation to movement of cargo (excluding export cargo) except actual transportation of goods.
Value of taxable service Gross amount charged by a cargo handling agency in relation to cargo handling services.
Exemptions See Notification No. 10/2002-ST, dt. 01/08/2002.
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See Chapter on "General Exemptions"
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Specific exemptions
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(i) Handling of export cargo, passenger baggage, mere transportation of cargo, unaccompanied baggage, cost of transportation on actual basis, abandoned cargo, marketing/canvassing for airlines, storing/washing/ repairing and handling of empty containers, individuals
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(ii) Agricultural produce, cold storage
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(iii) Crane services, warehousing services
Person liable to pay: Cargo Handling Agency:
Head of Account
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Questions & Answers
Q. Whether the services in the form of supply of provisions called "Ship Stores" provided by Ship Chandlers to the vessels are taxable?
Ans. The services rendered by Ship Chandlers are services rendered in relation to the vessel under authorization from port authorities and hence come within the ambit of Port Services and liable to Service Tax.
Q. Whether storage of empty containers attracts levy of Service Tax?
Ans. The handling/storage and warehousing of empty containers would be covered within the scope of storage and warehousing services and are liable for Service Tax.
Q. Whether handling/storage of empty containers within a port area would attract Service Tax?
Ans. The handling/storage of empty containers within a port area would be covered within the scope of Port Services, as empty containers would come under the definition of goods under Section 65(41) of the Finance Act, 1994. The earlier clarification regarding not to consider empty containers as cargo in the context of Cargo Handling Services has got no relevance vis-a-vis Port Services.
[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].
Main text of Departmental Circular/TN
F. No. B11/1/2002-TRU, Date: 1/8/2002
1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the finance Act, 2002. Reference to subclause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2:002.
2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and any other service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services.
3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services.
3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net.
3.2 Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax.
3.3 Cargo handling service provided in relation to storage of agricultural produce (scope of the term "agricultural produce" is given under the storage and warehousing service) or for goods meant to be stored in cold storage have been exempted from the levy of service tax. (See Notification No. 1O/2002-S.T.).
4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lump sum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges.
5. Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service. In this context it may be mentioned that 'port services cover any service provided in relation to goods or vessels by a port, or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore to this extent there may be an overlap in cargo handling service and the port service. However since port services covers all the service in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises.
6. All goods meant for export are excluded from the scope of this levy. There may be cases where goods may be transhipped at a place other than the place of packing before reaching a place from where it is exported. For example goods are packed say at Agra for transportation to Bhopal where it is transhipped and ultimately reaches Mumbai, from where it is exported. A doubt has been raised as to whether service tax would be leviable on cargo handling service at Agra. It is clarified service provided in relation to any cargo which is meant for export, would not be taxable irrespective of the fact that it reaches the place of export after transhipment. However, the relevant documents should show that the Goods are for export.
7. Passenger baggage has been excluded from the levy of service tax. In this regard a point has been raised as to whether unaccompanied baggage of a passenger attracts service tax under the category of passenger baggage. It is clarified that unaccompanied baggage of a passenger will not be leviable to service tax.
8. A point has been raised by Airports Authority of India (AAI) as to whether service tax will be leviable in respect of handling of transhipment of export cargo from one international carrier to another international carrier or from a domestic carrier to an international carrier. It is clarified that so long as the cargo is for export, no service tax on handling of such cargo is leviable. For domestic cargo service tax will be applicable.
9. Another point raised by them is that they undertake transhipment of import cargo from international to domestic carrier which will be ultimately cleared at the final domestic destination. It is stated that the service rendered by them should be held as exempted and it merely relates to transportation of goods. This is not factually correct. Under the Notification No. Cargo/13519/Pt. I, dated the 4th June, 1993, issued under the International Airports Authority Act, 1973, the AAI can levy charges towards demurrage, handling charges, special charges for live animals, hazardous cargo, radio-active cargo and cargo requiring strong room facilities, storage and processing charges, terminal charges. They are not supposed to levy any transportation charges. Therefore whatever charges they levy in this regard would be only towards handling charges and accordingly, service tax would be leviable.
10. It has been pointed out that Container Freight Stations that they do not have any direct contact with the importer and they only provide facility to the Customs House Agents (CHA) to handle the container and import cargo for which they have a contract on a mutually agreed rate. It is the CHA who claims all the charges from the importer including the charges made by the CFS on CHA and remit to the CFS. Since services of a CHA is already covered under the tax net, the CFS service providers should be exempt from tax when the billing is done on CHAs; otherwise there will be double taxation. The 'above contention is not correct. In the case of CHAs, the service tax is levied only on the agency or agency and attendance charges and not on the reimbursible expenses (on actuals basis) such as port fees, statutory levies, landing and container charges, dock fees, examination charges, terminal handling charges, etc. The CHA does not pay service tax on the handling charges charged by the CFS. Thus there is no double taxation. Further, as per the law, whatever charges, the cargo handling agency charges from any person (including the CHA) is--liable to service tax.
11. Another point raised relates to cases where the CFS offers a total package rate, which includes transportation and handling in respect of imported laden containers from Port to CFS. The question is if the cost of transportation is shown separately in the bill raised, will it be excluded from the levy of service tax. If the cost of transportation is claimed on actuals basis, then it will not be includible in the taxable value of cargo handling services.
12. A clarification has been sought as to whether service tax is payable on abandoned cargo which are auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods, the proceeds of the auction goes first to the cost of auction, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore service tax is not leviable.
13. Some of the cargo handling agencies may also act as marketing agents for individual airlines for which they get a commission, which seems to range from 5% to 15% of the freight. The question is whether service tax is payable on this. Marketing or canvassing for cargo for airlines does not come within the ambit of cargo handling services. Hence no service tax is payable under the category of cargo handling service.
14. CFSs also sometimes undertake storing/washing/repairing and handling of empty containers for the shipping lines for which they charge the shipping lines. Empty containers cannot be treated as cargo. Therefore, the activities mentioned above do not come within the purview of cargo handling services.
15. Another doubt raised in relation to cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of goods in their individual capacity, whether he would be liable to service tax as a cargo handling agency. It is clarified that such activities will not come under. the purview of service tax as a cargo handling agency.
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