SERVICE TAX ON COURIER SERVICES

[Dr. Sanjiv Agarwal]

Service tax has been imposed on courier services with effect from 1st November 1996, Vide Notification No. 6/1996-ST, dated 31st October, 1996. The gross amount charged by a courier agency from the customer in relation to taxable service is chargeable to service tax.

Meaning of Courier Agency

Section 65(33) defines 'courier agency' to mean any person engaged in the door-to-door transportation of time sensitive documents, goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles.

CBEC has clarified vide Master Circular No 96/2007-St dated 23.8.2007 (para 5.01 and 5.02) that express cargo services and angadia services are covered under courier services and hence shall be liable to service tax.

The courier agency should satisfy the following basic tests —

   (i) It should be any person (prior to 1-5-2006 commercial concern);

  (ii)  Service should be provided to a customer;

(iii)  It should engage in door to door delivery; and

(iv)  Transportation should be of time sensitive documents, goods or articles;

  (v)  Service provider should carry or accompany such goods or articles.

Meaning of Goods

Section 65(50) defines 'goods' to have the meaning assigned to it in Clause (7) of section 2 of the Sale of Goods Act 1930 (3 of 1930).

Thus, as per Sale of Goods Act, 1930, goods means every kind of moveable property other than actionable claims and money and includes stock and shares, growing crops, grain, and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale.

In Professional Couriers v. CCE & C 2008 -TMI - 4570 - (CESTAT BANGALORE), it was held that even goods or articles are also covered under courier agency service and the same are not confined to only time sensitive documents.

Taxable Service

Section 65(105)(f) defines 'taxable service'  to means any service provided or to be provided to any person, by as courier agency in relation to door-to-door transportation of time sensitive documents, goods or articles.

Prior to 1-5-2006, courier service to become taxable was required to be commercial in nature and it did not cover Government departments or agencies providing such services because they are not commercial concerns.

Replacement of 'customer' with any person' (w.e.f. 16.5.2008)

Finance Act 2008 has substituted the words 'any person' for the word 'customer' (w.e.f. 16.5.2008) as the service tax is levied on service and status of recipient of taxable service should not determine the tax treatment of a given service.

International Courier

Foreign courier agencies which collects a shipment from the consignor in India is not liable to pay service tax. Here the payment in made by the foreign company to the Indian Courier Company and not by the consignor in India. But if the Indian company recovers the service charges from the consignee in India; they will be liable to service tax.

In Yojana Couriers Pvt. Ltd. v. CCE, Trivandrum 2005 -TMI - 277 - (CESTAT - Bangalore), it was held that courier agency is not liable to pay any service tax provided that customers in India are not charged any amount for delivery of such documents, goods or articles in India (based on CBEC Letter No. 341/43/96-TRU dated 31.10.1996)

In The Professional Couriers v. CST, Chennai 2007 -TMI - 3797 - (CESTAT, CHENNAI), it has been held that prior to 15.6.2005, a courier agency was not liable to pay service tax on international courier service, part of which was performed in India and rest outside India in view of Export of Services Rules coming into force on 15.3.2005 and its amendment vide Notification No. 28/2005-ST dated 7.6.2005 w.e.f. 16.6.2005 [Also see TNT India Pvt. Ltd. v. CST, Bangalore (2007) TIOL 1038, (CESTAT, Bangalore)].

Where courier service involved delivery to customers abroad , ie, part of the transaction performed in India and partly outside India, it was held that international courier service was not taxable, being export of service [ First Flight Couriers Ltd v CCE,  Cochin 2009 -TMI - 76331 - (CESTAT, BANGALORE); CST v Overnite Express Ltd 2010 -TMI - 76333 - (CESTAT, CHENNAI)

In Vijayanand Roadlines Ltd. v. CCE, Belgaum 2005 -TMI - 266 - (CESTAT, BANGLORE), assessee was engaged in door to door transportation of goods or articles by utilizing the services of a person either directly or indirectly to carry or accompany such articles or goods or documents. It was held that when the services of a person are utilized either directly or indirectly in as much as the customer goes to courier agent's office and delivers his documents etc., such services are covered under the definition of courier agency.

In On Time Couriers v. CCE (2007) 7 STT 194 (CESTAT, Kolkata), it was held that business between two courier agencies (co-loaders) was not covered by rules and no service tax was leviable on the same. Co-loaders providing services to courier agencies are not covered by the definition of courier agencies in as much as they are not providing any service directly to the customers.

Transportation of Money

In Patel Ambalal Hargovanlal & Co. v. Commissioner of Central Excise, Surat-I [2005 (187) ELT 65 (CESTAT, Mumbai)] CESTAT, Mumbai (Western Zonal Bench) has given the following significant rulings in respect of courier services in relation to transfer of money -

(a)   Transportation of time sensitive documents or goods or articles does not include Indian currency which is a legal tender at any given time.

(b)   Transfer of money deposited at one branch by transmission of instruction to pay (not transportation) to pay the amount equivalent to that deposited, to the nominee of the client at the destination, does not amount to transportation of money and cannot said to be covered under the definition of courier agency under section 65(33) of the Finance Act, 1994. Thus, remuneration or consideration for such transfer of money through transmission of instructions is not liable to service tax as courier services.

In case of transfer/transport of actual currency notes (physical cash) as deposited in one branch to its another branch for physical delivery to the consignor is the transportation of money covered under the definition of courier agency and any remuneration or consideration for such transportation of money would be liable for service tax.

There is no definition of documents, goods or articles in the statute imposing service tax. The common understanding of the meaning of the word 'sensitive documents or goods, articles' will not cover Indian currency which in legal tender at a given time. It was, therefore, held that such tender of Indian currencies and its transmission and compensatory payment would not be covered by the levy of service tax under the category of 'courier services'.

Value of Taxable Service

In case of comprehensive business or services, it was represented to the Department that some courier agencies undertake comprehensive business and provide integrated transportation, warehousing, packing, inventory management, etc. Doubts were also expressed whether courier agencies are liable to pay service tax in respect of service provided in relation to warehousing, packing, inventory management, etc. On this, CBEC in Trade Notice No. 1/96-ST, dated 31-10-1996  (since withdrawn) had clarified that where even the above facilities are relatable to door-to-door transportation and are undertaken by the courier agencies themselves, the charges for such facilities are also includible in the gross amount and service tax collected accordingly. However, if warehousing facilities are not in relation to door to door delivery of parcel, the service charges so payable shall be excluded from the value of taxable service.

Expenses incurred by courier agencies for octroi, insurance, custom duty, etc.are reimbursed by the customer and hence are not included in the value of taxable service.

Specific Exemptions

   (i)  Taxable services provide by courier services to the specified diplomatic missions are exempt from tax as per Notification No. 44/98-ST dated 22-1-1998

  (ii)  Service provided to the United Nations or an International Organisation are also exempt from tax (Notification No. 45 & 48/98-ST, dated 22-2-1998 and 24-4-1998).

        The Notification Nos. 44, 45, 48 stand rescinded. General examption is available vide Notification Nos. 33/2007 and 34/2007 dated 23-5-2007.

(iii)  Courier Services provided by postal authorities of the Government as 'Speed Post Services' or Express Mail Services (EMS) is exempt from tax.

Exemption in respect of Exports

Courier services as specified in Notification No. 3/2008- ST dated 19.2.2008 have been exempted (refund allowed) in case of exporters under Notification No. 41/2007-ST dated 6.10.2007. Accordingly, following courier services received by an exporter and used for export of goods shall be exempt from levy of service tax subject to certain conditions and claim of refund as per prescribed procedure -

"Service provided by courier agency an exporter in relation to transportation of time sensitive documents, goods or articles relating to export to a destination outside India".

For claming exemption, exporter will have to comply with the following conditions-

(i)    the receipt issued by the courier agency specifies the importer exporter, (IEC) code number of the exporter export invoice number nature of courier, destination of the courier including name and address of the recipient of the courier, and

(ii)    the exporter produces evidence to link the use of courier service to export goods.

Notification No. 41/2007 has since been superseded by Notification No. 17/2009-ST dated 7.7.2009 and similar exemption exists in para 10 of Notification No. 17/2009-ST subject to terms and conditions.

Person Liable

Every courier agency raising the bill for services rendered to any person by such agency shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.