CBEC issues clarification on applicability of Service Tax on
freight-forwarders as intermediary
In terms of Rule 10 of the Place of Provision of Services Rules,
2012 ['PPS Rules'], place of provision of the services of
transportation of goods, other than by way of mail or courier, is
the destination of the goods. Thus, place of provision of the
services of transportation of goods by air/ sea from a place in
India to a place outside India would be outside India and thereby
would not be subject to service tax. Further, Rule 9 of the PPS
Rules provides that place of provision of intermediary services is
the location of intermediary. The term intermediary is defined as a
person who arranges or facilitates the provision of a service or
supply of goods between two or more person, but does not include a
person who provides the main service or supplies the good on his
In view of the above provisions, Central Board of Excise and
Customs ['CBEC'] issues following clarifications on
applicability of service tax on services provided by
freight-forwarders in relation to transportation of goods by air/
sea from a place in India to a place outside India:
In case a freight-forwarder acts as an agent of airline/
carrier/ ocean-liner with no responsibility for actual
transportation, freight forwarder may be considered to be an
intermediary. Accordingly, in terms of Rule 9 of the PPS Rules,
place of provision of services provided by the freight-forwarder
would be India and thereby would be subject to service tax.
However, service of actual transportation of goods by the airline/
carrier/ ocean-liner would not be subject to service tax in terms
of Rule 10 of the Rules ibid.
In case the freight-forwarder acts as a principal for the
transportation of goods and undertakes all the assessed risks and
legal responsibilities associated with the transportation, freight
forwarder would not be considered as an intermediary. Accordingly,
services provided by the freight forwarder in such a scenario would
not be subject to service tax in terms of Rule 10 of the Rules
Nangia's Take –
The Circular brings about clarity on freight-forwarder being an
intermediary. It is clarified that a freight-forwarders acting as
an agent would only be considered as an intermediary. Whereas a
freight-forwarder acting as a principal for transportation of goods
and undertaking the related risks and responsibilities, would not
be covered under the definition of intermediary.
[Source: Circular No. 197/7/2016-Service Tax dated 12 August
Assam and Bihar ratify the Goods and Services Tax
('GST') Constitution Amendment Bill
On 12 August 2016, Assam ratified the GST Constitution Amendment
Bill. On 16 August 2016, Bihar ratified the GST Constitution
Amendment Bill, thereby becoming the second state and first
opposition-ruled state to ratify the GST Constitution Amendment
To become law of the land, the GST Constitution Amendment Bill
needs to be ratified by more than half of the state
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