Service Tax on freight charges – Postal Department – Board has its doubts
The Postal Department had a doubt,
It is to intimate that this office has engaged several shipping companies for conveyance of outward surface Indian Postal Mails to the various ports of foreign countries.
Recently some shipping companies are charging service tax in their freight bills for following services:
1) delivery charges
2) Terminal Handling charges @ 12.24%
Kindly intimate whether Indian Postal outward surface mail bags are subject to levy of service tax or otherwise
Further it is to add that these shipping companies liable to pay service tax @ 12.24% of the amount payable to them as mail conveyance charges. It may kindly be clarified.
The Board has clarified to the DGST,
As stated, Postal Department has engaged shipping companies for conveyance of outward surface Indian Postal Mails to various ports of foreign countries and handling of export cargo or passenger baggage etc. From the facts mentioned it appears that the service provided by shipping companies is in the nature ‘ distribution, management and logistics' and delivery order charges and inland haulage charges collected by shipping companies are for such ‘distribution management and logistics' service. Such service is specially covered under ‘business support services' and is liable to service tax. However, in case there are facts which indicate that that appropriate classification of the service provided is ‘cargo handling service' the same may be brought to the notice of this office.
So the Board which was supposed to give a clarification has expressed a doubt as to whether the service is “Cargo Handling service”. And for a change, the Board is right! But should the Board express a doubt, when they are supposed to clarify on the doubts?
CBEC's F.No . 137/131/2007 - CX.4 Dated : December 12, 2007