Service tax and Ocean freight: An analysis

I have read the above Article with great interest. My comments on the following two portions of the Article are as under:
1.
QUOTE If it is an intermediary who arranges the said transportation of goods for a manufacturer or a dealer, it will be taxable on reverse charge basis in the hands of the business entity facilitating with the possibility of passing on the credit of service tax paid on ocean freight at 30% of its value to the Indian manufacturer / dealer who in turn can utilize the credit and keep the CENVAT chain going. UNQUOTE

COMMENTS: After substitution of the definition of the term ‘intermediary’ given in the POPS Rules, 2012, vide Notification No. 14/2014-ST w.e.f. 1.10.2014, the place of provision for services of intermediary of goods is the location of service provider, i.e. location of intermediary, as per Rule 9 of POPS Rules, 2012. Therefore, if the intermediary is located in taxable territory of India, he has to pay service tax under forward charge and if the intermediary is located outside taxable territory, no service tax is leviable under reverse charge.
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2.
QUOTE Whereas, in the case of imports by a foreign shipping lines on CIF basis, the freight element is built into the cost of goods and borne by the foreign shipping line in a foreign land and hence the possibility of taxing the same does not arise in terms of Place of Provision of Service Rules, as it exists now. UNQUOTE

COMMENTS: I agree with the aforesaid contention of the learned author. When freight is paid by the foreign supplier to the foreign shipping line for transportation of goods to India, service tax cannot be levied, as the POP is outside taxable territory. However, in RAC meeting of Hyderabad Zone held on 25.4.2016, opposite clarification has been given, which was published in DDT dated 30.6.2016. Extracts given below:

"The Chief Commissioner explained that actual Ocean freight is always available and hence there will not be any problem in payment of service tax. In the case of ocean freight charges prepaid by the exporter abroad it was opined that the actual ocean freight paid can be ascertained directly from the exporter abroad or can also be ascertained from the shipping liners. Further it was mentioned that since the service tax is required to be paid by 6th of the following month and by 31st March for the month of March there would be sufficient time to ascertain the same and pay service tax."

http://www.taxindiaonline.com/RC2/print_story.php?newsid=27403

These are personal views.

Shvetal Parikh 08/07/2016