Service tax and tds
This query is : Resolved
24 June 2015
Dear Members,
one of the our shipping agencies raised a bill on us as..
international safety port surcharge (o) ***
ICD pendency surcharge (o) ***
ISR (o) ***
dest. thc (P) ***
cleaning charges (P) ***
Infrastructure cess (P) ***
Maintenance charge (P) ***
D/O fees (A) ***
EDI charge (A) ***
Rail Congestion surcharge (A) ***
____
service tax
1. principal service tax (on "O" & "P") ***
2. agent service tax (on "A") ***
My query is
1. Why service tax is bifurcated on principal and agent?
2. whether credit of service tax is available? if available then on which amount?
3. whether TDS is deducted?
one of the our shipping agencies raised a bill on us as..
international safety port surcharge (o) ***
ICD pendency surcharge (o) ***
ISR (o) ***
dest. thc (P) ***
cleaning charges (P) ***
Infrastructure cess (P) ***
Maintenance charge (P) ***
D/O fees (A) ***
EDI charge (A) ***
Rail Congestion surcharge (A) ***
____
service tax
1. principal service tax (on "O" & "P") ***
2. agent service tax (on "A") ***
My query is
1. Why service tax is bifurcated on principal and agent?
2. whether credit of service tax is available? if available then on which amount?
3. whether TDS is deducted?
24 June 2015
IN ABOVE SOME AMOUNT IS REIMBURSEMNT TAKEN BY YOUR CLEARING AGENT. THEN TDS IS NOT APPLICABLE IF BILL SEPERATELY RAISED BY THE AGENT.
ON REMAIN YOU HAVE TO DEDCTED THE TDS U/S 194C IF MONERY LIMIT EXCEEDS.
IT MAY POSSIBLE YOUR AGENT IS SUB AGENT AND ITS RECOVER THE AMOUNT HE ALREADY PAY TO PRINCIPLE.
ON REMAIN YOU HAVE TO DEDCTED THE TDS U/S 194C IF MONERY LIMIT EXCEEDS.
IT MAY POSSIBLE YOUR AGENT IS SUB AGENT AND ITS RECOVER THE AMOUNT HE ALREADY PAY TO PRINCIPLE.
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24 July 2025
Great questions! Let’s unpack your shipping agency bill and the related Service Tax and TDS issues step-by-step.
1. Why is Service Tax bifurcated into Principal Service Tax and Agent Service Tax?
Principal Service Tax (on "O" & "P" charges):
These are principal services provided directly by the shipping agency. Examples like International Safety Port Surcharge (O), ICD Pendency Surcharge (O), and Infrastructure Cess (P) relate to principal services they render.
Agent Service Tax (on "A" charges):
These are agent services where the shipping agency acts as an agent on behalf of some other entity (often the port authority or railways), and they collect charges for those services. For example, D/O Fees (A), EDI Charges (A), Rail Congestion Surcharge (A) are charges passed through by the agency acting as an agent.
Reason for bifurcation:
Service tax law treats principal services and agent services differently in terms of liability and credit. When acting as an agent, the service provider collects and remits tax on behalf of the principal.
2. Is Cenvat Credit Available? If yes, on which amount?
Credit Availability:
You can avail Cenvat Credit only on principal services, i.e., on the charges where the shipping agency is providing the service directly to you.
On Agent Services:
Since the agency acts as an agent to collect and remit charges on behalf of another entity, you cannot take Cenvat Credit on agent service tax portion. This is because you are not receiving a direct service for that part.
Summary:
Take credit on service tax paid on "O" and "P" charges (principal services).
Do NOT take credit on service tax paid on "A" charges (agent services).
3. Whether TDS (Tax Deducted at Source) is Deducted?
TDS Applicability:
Under Section 194C or 194J of the Income Tax Act, TDS is applicable on payments made for services.
On Service Tax:
TDS is deducted on the total invoice amount excluding service tax — i.e., TDS is on the value of services, not on the service tax component.
Your Case:
You should deduct TDS on the sum of all charges (O + P + A) excluding the service tax.
Implications:
The shipping agency will get credit for TDS deducted when filing income tax returns.
Make sure TDS certificate (Form 16A) is obtained from the agency.
4. Summary of Implications of Service Tax
Point Details
Principal Service Tax Paid on charges where agency is direct provider; eligible for credit.
Agent Service Tax Paid on charges collected as agent; not eligible for credit.
Cenvat Credit Available only on principal service tax portion.
TDS Deduct on invoice amount excluding service tax.
Invoice Should clearly bifurcate principal and agent service tax amounts.
1. Why is Service Tax bifurcated into Principal Service Tax and Agent Service Tax?
Principal Service Tax (on "O" & "P" charges):
These are principal services provided directly by the shipping agency. Examples like International Safety Port Surcharge (O), ICD Pendency Surcharge (O), and Infrastructure Cess (P) relate to principal services they render.
Agent Service Tax (on "A" charges):
These are agent services where the shipping agency acts as an agent on behalf of some other entity (often the port authority or railways), and they collect charges for those services. For example, D/O Fees (A), EDI Charges (A), Rail Congestion Surcharge (A) are charges passed through by the agency acting as an agent.
Reason for bifurcation:
Service tax law treats principal services and agent services differently in terms of liability and credit. When acting as an agent, the service provider collects and remits tax on behalf of the principal.
2. Is Cenvat Credit Available? If yes, on which amount?
Credit Availability:
You can avail Cenvat Credit only on principal services, i.e., on the charges where the shipping agency is providing the service directly to you.
On Agent Services:
Since the agency acts as an agent to collect and remit charges on behalf of another entity, you cannot take Cenvat Credit on agent service tax portion. This is because you are not receiving a direct service for that part.
Summary:
Take credit on service tax paid on "O" and "P" charges (principal services).
Do NOT take credit on service tax paid on "A" charges (agent services).
3. Whether TDS (Tax Deducted at Source) is Deducted?
TDS Applicability:
Under Section 194C or 194J of the Income Tax Act, TDS is applicable on payments made for services.
On Service Tax:
TDS is deducted on the total invoice amount excluding service tax — i.e., TDS is on the value of services, not on the service tax component.
Your Case:
You should deduct TDS on the sum of all charges (O + P + A) excluding the service tax.
Implications:
The shipping agency will get credit for TDS deducted when filing income tax returns.
Make sure TDS certificate (Form 16A) is obtained from the agency.
4. Summary of Implications of Service Tax
Point Details
Principal Service Tax Paid on charges where agency is direct provider; eligible for credit.
Agent Service Tax Paid on charges collected as agent; not eligible for credit.
Cenvat Credit Available only on principal service tax portion.
TDS Deduct on invoice amount excluding service tax.
Invoice Should clearly bifurcate principal and agent service tax amounts.
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