Courier agency business gained its boom in the economy when the players in e-tailer market have gained importance.
At the very instinct we have to understand what is Courier agency services?
As per Sec 65B interpretations “courier agency" means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articlesutilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles.
The very next interesting question that arises is what is “time sensitive goods”?? It is pertinent to note that it is no where defined under service tax law. Whereas the dictionary meaning is given as: Product that has to be delivered by a particular time or information that is only useful for a particular period.
From above it is clear that courier agency involves a person
1. Using a service of a person
2. Either directly or indirectly
3. To carry or accompany such documents, goods or articles.
Tax liability- The Service tax needs to be paid at full rate i.e. 14% on total Consideration along with Swach Bharath Cess @ 0.5% received from the customer as there are no other benefits are available.
CENVAT Credit:
The agency can avail any CENVAT credit of:
Capital Goods, like goods falling under chapter 82, Chapter 84…etc
Inputs used in the provision of service and
Input services like accounting, auditing…. etc
Provided, they satisfy the definition as per CENVAT Credit Rules, 2004.(Referred as CCR,2004)
Take away for Professionals
As per CCR, 2004 Credit on Motor vehicles is defined under two separate limbs mentioned for defining Capital Goods, such as:
Motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and the1ir chassis but including dumpers and tippers.
Motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for –
(i) Providing an output service of renting of such motor vehicle; or
(ii) Transportation of inputs and capital goods used for providing an output service; or
(iii) Providing an output service of courier agency;
This enables the courier agency to avail the CENVAT credit on Motor vehicles which are designed for transportation of goods used for providing Service.
Hence, the Professionals must ensure that the courier agency when purchasing the Motor vehicles that they are purchased from Proper Central Excise Dealers who can pass on such benefit. Usually these could be Tempos etc.
Whether Motor Bikes normally used by delivery boys are eligible for availing CENVAT credit?
Here, it is pertinent to note that only Motor vehicles designed for transportation of goods are straight away eligible for availing CENVAT credit. Hence Motor Bikes are not eligible for availing CENVAT credit provided they are not excluded from 8702, 8703…etc as provided in the first limb.
1. The CENVAT credit on some inputs such as Delivery Bags…etc used in the provision of output service can be availed.
2. CENVAT credit on Input services such as auidt fee and other related services can also be availed as CENVAT credit.
General Exemptions
Services provided to the United Nations or a specified international organization
Therefore, if the services are provided to UNO…etc are eligible for claiming Exemption and hence not taxable.
Note: There are no Specific exemptions provided
Place of Provision
It is pertinent to note that provisions of Service tax do not apply to the State of Jammu & Kashmir and services provided outside India.
Determination of Place of provision also plays a major role in claiming Export Benefits
i. Delivery needs to be given in Jammu & Kashmir , or
ii. Goods needs to be picked up from Jammu & Kashmir and need to be delivered in any other place.
Further taxable territory is defined as
"Taxable territory" means the territory to which the provisions of this Chapter apply.
Therefore if the services are provided in other than taxable territory it is not liable for service tax. Here the question is whether the services are provided in other than taxable territory or not?
For this, we have to examine Place of Provision rules 2011 (POPS rules)
There are 14 rules prescribed in these rules of those are some are service specific and some are in general. Let us throw light on those rules which are relevant in this context
Rule 3: Place of provision generally the place of provision of a service shall be the location of the recipient of service
Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.
Rule 10: Place of provision of goods transportation services The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods………
From the above it is clear that Rule 10 is not applicable as it specifically provides for service other than courier.
Therefore the rule that is more appropriate is Rule 3 and hence the place of provision is location of service receiver.
The next question arises is what is the location of Service receiver?
As per Rule 2 of the POPS it is defined as follows:
1. Where the recipient of service has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;
2. Where the recipient of service is not covered under sub-clause (1)
3. The location of his business establishment; or
4. Where services are used at a place other than the business establishment, that is to say, a fixed
5. Establishment elsewhere, the location of such establishment; or
6. Where services are used at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service; and
7. In the absence of such places, the usual place of residence of the recipient of service.
The service receiver in the ordinary course is the person who sends the courier and pays the consideration to the courier agency. Now it is easy to understand that if the customer residing in Jammu & Kashmir avails the services and sends the parcel to a place out of Jammu & Kashmir then such transaction is deemed to be provided in other than taxable territory and hence may not be liable for service tax.
On other hand if the courier/parcel is delivered in Jammu & Kashmir that transaction may not be said to be provided in other than taxable territory hence service tax needs to be charged.
Further the agency can in the same way if the services are deemed to be provided Outside India the Export benefits can also be availed.
Hope the write-up is informative.
Please feel free to share your valuable feedback and queries
Disclaimer: This article is only based on the general statutory provision of service tax applicable. This cannot be considered as our legal opinion/advice
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