Steamer agent's services were brought under the Service Tax net by the Finance Act, 1997, w.e.f. 15-6-1997 vide Notification No. 17/97, dated 6-6-1997. The service shall be taxed, if provided by a Steamer agent to a shipping line.

Rate of Service Tax: The rate of service tax is specified in section 66 of the Act. The Finance (No. 2) Act, 2004 has substituted the charging section 66, and the rate of service tax is enhanced from 8% to 10% ad valorem. The increase in tax rate has come into force from the date of enactment of the Finance (No. 2) Act, 2004 i.e. 10-9-2004. Further, the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004 has also levied an education cess @ 2 % of the service tax. The cess paid on inputs services shall be available as credit for payment of cess on output services. For further discussion in this regard, refer to -'Payment of Service Tax'.

The definition of steamer agent has been given under clause (100) of section 65. It provides:

"steamer agent means any person who undertakes, either directly or indirectly,

(i) to perform any service in connection with the ship's husbandry or dispatch including the rendering of administrative work related thereto, or

(ii) to book, advertise or canvass for cargo for or on behalf of a shipping line, or

(iii) to provide container feeder services for or on behalf of a shipping line".

The steamer agent provides the services to the shipping line/shipping company. The 'shipping line' is not in a position to operate/manage its office at every port. Therefore, it utilizes the services of a steamer agent to carry out its business at every port. There is an agent and principal relationship between steamer agent and the shipping line because the steamer agent essentially works as an agent of the shipping lines. Therefore, the provisions of section 182 to section 238 of the Indian Contract Act, 1872 related to 'agency' shall be applicable in this case. The shipping line offers commission to the steamer agent for his services usually based on percentage of the net ocean freight as per the agreement between shipping line and steamer agent. The protecting steamer agent provides services in connection with the ship's husbandry and operating steamer agent provides services in connection with loading, unloading of cargo, container feeder services and administrative work related thereto.

(1) Meaning of 'person'

The steamer agent should be a 'person'. The term 'person' has not bee defined in the context of service tax. But, the term 'person' has been defined as "person shall include any company or association or body of individual, whether incorporated or not" [clause (42) of section 3 of General Clauses Act, 1897].

Therefore, even though, in general, person is understood as only natural person (i.e. human being) but in the context of service tax, it includes natural, artificial and juristic person also. Thus, partnership firm, company, corporation, societies, government enterprises, Hindu undivided family (H.U.F.), etc. will also fall under the definition of person. Therefore, a steamer agent may be artificial or juristic person or may be a natural person.

(2) What is 'directly or indirectly'?

Services are subject to tax when provided 'directly or indirectly'. Sometimes, it may be possible that service provider may not alone be able to execute the work and takes the help of other person or concern by employing them on subcontract basis for the execution of work. In this case, even if service provider gets the part of the service done by employing the services of other person or concern, it will be treated that services are provided by the original service provider and tax would be charged on the entire services.

(3) 'ship's husbandry'

The term 'ship's husbandry' means 'an owner's agent who manages the affairs of a ship in port' (reference the Chambers English Dictionary). In the present context of service tax, 'ship's husbandry' includes repairing, maintenance, insurance etc. in relation of a ship to ensure that the ship is sea worthy to take journey.

(4) 'book, advertise or canvass for cargo'

The steamer agent also provides services to the shipping line for booking of cargo. For this purpose, the steamer agent also advertises or canvasses so that shipping line may get more and more cargo. The steamer agent may do so by placing advertisements in the newspaper etc.

(5) 'container feeder services'

The transhipping of cargo from one port to another port is known as 'container feeder services'. Sometimes, the ships of some leading shipping line do not stop on each port during their voyage but only on certain specified ports. Therefore, when some cargo is required to be sent through these ships, the cargo is required to be sent from small port to the port where the ship of the leading shipping line will stop. This is known as 'transhipping of cargo' or 'container feeder'. Such services are provided by the steamer agent.

Taxable service

The definition of taxable service provided by a steamer agent has been given under clause (i) of clause (105) of section 65. That is:

any service provided "to a shipping line, by a steamer agent in relation to a ship's husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services".

(1) Scope of steamer agent's services

The steamer agents provide various services to the shipping line which includes maintenance of ship to keep it sea worthy, providing details of expected date of arrival of ship and details of cargo, preparing of inward general manifest, make arrangement for loading/ unloading of cargo an arrange the place to store the cargo, arranging the berth for the ship at port, payment of port charges, custom duty etc. on behalf of shipping line, to collect the charges from the customers on behalf of shipping line, issue of shipping bill to the customer on behalf of shipping line, arrange the cargo near the berth for loading, prepare the list of cargo to be exported, take copy of mate receipts from the captain of the ship etc. 0

(2) Whether payments received for container handling service by a steamer agent attract the service tax?

The container handling services provided by the steamer agent is in relation to the ships' husbandry. Therefore, the payment received thereof from shipping line would be liable for payment of service tax.

Liable to pay service tax

Service tax is liable to be paid when steamer agent services are provided by a 'steamer agent', which has been already explained at the outset of this Chapter.

Steamer agent services liable to be charged to tax

Steamer agent services liable to be charged to service tax when provided to -

§ a shipping line,

§ in relation to a ship's husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services.

(1) What is a shipping line?

The definition of shipping line has been given in clause (97) of section 65 of this Act. It provides:

"shipping line means any person who owns or charters a ship and includes an enterprise which operates or manages the business of shipping".

(2) What is ship?

The definition of ship has been given in clause (96) of section 65 of this Act. It provides:

"ship means a sea-going vessel and includes a sailing vessel".

Value of taxable services for charging tax

The value of taxable services in relation to steamer agent services provided by a steamer agent to a shipping line shall be the gross amount charged in relation to shipping line in connection with this service [section 67].

Explanation 1 has also been added to section 67, which provides that, for the removal of doubt, in respect of only certain specific services, it is declared that certain amount shall be the part of value of taxable services and certain amount shall not be the part of the value of taxable services, but nothing has been specified in respect of steamer agent's services.

(1) Whether expenses incurred on behalf of the shipping line are part of the value of taxable services

No, the steamer agent, while rendering the services incurs various expenses on behalf of the shipping line. Such expenses may be incurred for the following purposes

1. pilottage and berth hire charges;

2. India coast light dues paid to the port authorities;

3. Cargo expenses paid to port authorities and transporters, such as CONCOR/ railways, private transporters;

4. Chartered Accountants fee;

5. Income-tax;

6. Brokerage paid on export cargo;

7. Ship-handling expenses paid to stevedoring agents.

The steamer agent may also reflect aforesaid expenses in the bill raised to the shipping line. Therefore, as per the bill, these expenses shall also form 1gross amount charged' by the steamer agent from the shipping line. Even though, as per definition of value of taxable services given under section 67, the value of taxable service shall be the 'gross amount charged' from the shipping line but in this case, all the above charges the steamer agent is ordinarily reimbursed by the shipping line, will not form part of the taxable value. The Government in its Circular F. No. B 43/1/97-TRU, dated 6-6-1997 (appended as Annexure 1) has clarified, "in relation to the steamer agent the service charges will constitute the husbandry fee as well as the agency commission on import/ export of cargo. Other expenses incurred by the steamer agent on behalf of the shipping line shall not be taken into account" for the purpose of value of taxable service.

The steamer agent charges the shipping line for two types of service charges. One is called husbandry fee, which he charges for a ships' husbandry. The second is the agency commission, which is paid by the shipping line on the import and export of cargo. These commissions are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the steamer agent and shipping line. The Government in its Circular F. No. B 43/1/97-TRU, dated 6-6-1997 (appended as Annexure I) has clarified, "in relation to the steamer agent the service charges will constitute the husbandry fee as well as the agency commission on import/ export of cargo" and the same will be the value of taxable service for the purpose of service tax without claiming any abatements towards administrative/ office expenses incurred for rendering such services. In other words, 'gross amount' here indicates that no deduction shall be allowed in respect of any expenditure incurred by the service provider which has proximate connection in rendering the services by him, except those expenses which are incurred by him on behalf of the shipping line and reimbursable on actual basis.

Exempted Services

The Government has granted exemption from the whole of Service Tax in respect of all taxable services, for services provided to United Nations or an International Organisation. Similarly, the exemption, subject to certain conditions, has also been granted for taxable service provided to a developer or units of Special Economic Zone (SEZ). The Government, w.e.f. 20 November, 2003 has restored the exemption, as an interim measure, from the whole of service tax when payment is received in convertible foreign exchange for the taxable services rendered in India provided it was not repatriated from or sent outside India, such exemption was earlier withdrawn w.e.f. 1-3-2003. The reader may note that detailed discussion about aforesaid exemptions along with relevant notifications have been given in the Chapter on 'Exemption from whole of Service Tax - Some Cases'.

N.B. The readers may note that provisions, procedures and other related discussion related to registration, payments of service tax, filing of return, interest and penalty, assessment procedure, appeal, refund of tax, etc., which are same, as applicable in respect of other taxable services, have been given in separate Chapters.

Annexure I

Clarification on imposition of service tax on services rendered by steamer agents

[C.B.E. & C. Circular F. No. B 43/1/97-TRU, dated 6-6-1997, relevant extracts]

Steamer agents

3.1 The expression 'steamer agent' has been defined to mean any person who undertakes, either directly or indirectly,

(a) to perform any service in connection with the ships' husbandry or dispatch including the rendering of administrative work related thereto; or

(b) 'to book, advertise or canvass for cargo for or on behalf of a shipping line; or .

3.2 The taxable service provided by a steamer agent to a shipping line, is the service provided by a steamer agent in relation to a ship's husbandry or dispatch or any administrative work related thereto as well as the booking, advertising, or canvassing of cargo, including container feeder services. The value of the taxable service in relation to service provided by a steamer agent to a shipping line, shall be the gross amount charged by such agent from the shipping line for services in relation to a ship's husbandry or dispatch or any administrative. work related thereto or in relation to the booking, advertising, or canvassing of cargo, container feeder services including the commission paid to such agent.

3.3 Steamer agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, car go expenses paid to port authorities and transporters such as CONCOR/ railways, private transporters, chartered accountants fee, income-tax, brokerage paid on export cargo, ship-handling expenses paid to stevedoring agents. For all the above charges the Steamer agent is ordinarily reimbursed by the shipping line. Further, the steamer agent bills the principals, i.e. the shipping line, for two types of service charges. One is called the husbandry fee which the~ charge for a ships. husbandry. The second is the agency commission which is -paid by the shipping line on the import an* d export cargo. These commissions are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the steamer agent and shipping line.

3.4 It is clarified that in relation to the steamer agent the service charges will constitute the husbandry fee, as well as the agency commission on import/ export cargo. Other expenses incurred by the steamer agent on behalf of the shipping line shall not be taken into account.

3.5 It has been represented that the accounting for purposes of service tax should be on per voyage, per vessel basis and further that the registration for service tax purposes should be done only of their seaport offices. It has been decided that only such seaport offices of the steamer agent should be registered for service tax purpose which are raising the bill to the shipping lines. The branch offices in ICDs which are just sales offices and do not raise any bills to the shipping line, need not be registered. This is for the reason that billing is done by the sea port offices and not the branch offices.