This service primarily relates to door-to-door transportation of time-sensitive documents, goods or articles utilizing the service of a person, either directly or indirectly, to carry or accompany such documents, goods or articles.
Understanding the service
Section 65B (44) provides the definition of service as any activity carried out by a person for another for a consideration. The scope of the definition is very wide so as to cover wide range of activities under its ambit.
Provision relating to Negative List
Clause (p) of section 66D specifies service of transportation of goods by road, airways, and waterways as non-taxable services. However the said clause specifically excludes service provided by courier agency from negative list. Therefore, services provided by courier agency will be considered as a taxable service and service tax will be payable on the same.
Provisions relating to exemptions
Small Service Provider
Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
Import of Technology
Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.
To Foreign Diplomatic missions and their personnel
Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.
Services by TBI or STEP
Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted
Services provided to SEZ
Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.
No specific Exemption had been granted by the Government in case of Courier Agency services.
Provisions relating to Valuation and Abatement
Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.
In respect of Courier agency services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable courier agency services is to be determined in terms of provision of Section 67 read with the prescribed rules.
No abatement has been granted to any person liable to pay service tax under the section.
Provisions relating to Cenvat Credit
The Cenvat Credit Rule, 2004 provides for availment of credit of excise duty paid on inputs and capital goods and service tax paid on inputs service. The words ‘capital goods’, ‘inputs’ and ‘input service’ are defined respectively in rule 2(a), 2(k) and 2(l). The credit is available to the manufacturer or service provider of the duty or tax paid on these items.
The service tax would be payable by courier agency at the prevalent rate on the gross amount charged. Therefore, the service provider will be entitled to the credit of excise duty paid on inputs and capital goods and service tax paid on input services.
Provisions relating to point of taxation
Normally, in case of services provided by courier agency, payment is received before the actual service is provided. The point of taxation of services provided by courier agency will be governed by Rule 3 of Point of Taxation Rules, 2011.
As per Rule 3 of Point of Taxation Rules, 2011, the point of taxation shall be-
Time when the invoice for the service provided or to be provided is issued. As per Rule 4A of Service Tax Rules, invoice shall be issued within 30 days from the date of completion of service. In case invoice is not issued within 30 days from the completion of service, the point of taxation shall be the date of completion of service.
In case where the person providing the service receives payment before the time specified above, the date of receipt of payment shall be the point of taxation
In many cases, the service provider would receive advance for delivery goods. As per rule 3(b), the service tax will be payable on receipt of advance even if the services are rendered later.
Provisions relating to Place of Provision
Rule 4 of Place of Provision Rules, 2012 states that the services provided in respect of good making available of goods physically by one person to another so as to complete the rendition of service. Para 5.4.1.of Taxation of Services – An Education Guide dated 20.06.2012 explains the category in the following words “Services that are related to goods, and which require such goods to be made available to the service provider so that the service can be rendered, are covered here. Examples of such services are courier service. The rule provides that in all such cases the place of provision would be one where services are actually provided.
Provisions relating to reverse charge
The Central Government has issued Notification No. 30/2012-ST dated 20-6-2012 notifying the services and the person liable to pay service tax. None of the entry in the said notification relates to service provided by courier agency. Hence, in this case, the service provider viz, the courier agency will be the person liable to pay tax.
Other Important Aspects
In the case of Preeti Courier v. Commissioner of Central Excise, Ahmedabad  22 taxmann.com 133 (Ahd. – CESTAT), it was held that where assessee had acted only as an employee of a courier agency, demand of service tax cannot be raised on him under head ‘courier agency service’.