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         Clearing & Forwarding Agents
   
 
Q.1 Who are clearing and forwarding agents?
Ans. Clearing and forwarding agents are those who provide services relating to the clearing and forwarding operations and are engaged/appointed by manufacturer of goods (both excisable and non-excisable), producers and distributors of goods and also include such agents appointed for agricultural and mineral goods. 
Q.2  Who is the person responsible for payment of Service Tax in case of a clearing and forwarding agent ?
Ans. As in the case of all other services, the service providers are responsible for payment of Service Tax in respect of clearing and forwarding agents also.

Earlier, it was directed that receivers of the service would be responsible for paying the Service Tax. The same has been held to be invalid by the Hon’ble Supreme Court of India in the case of M/s.Laghu Udyog Bharati and Another Vs. Union of India {1999(89)ELT.247(SC)}. Finance Bill 2000 has sought to revalidate earlier position for limited period from 16.07.1997 to 01.08.1998 .
Q.3  What are the types of services provided by clearing and forwarding agents which attract Service Tax?
Ans. The levy of Service Tax will applies to services rendered by clearing and forwarding agents, who undertake, among other things, services of receipt, warehousing, despatch, record maintenance and account of goods on behalf of the principal who appoint or engage such agents.

Normally, there would be a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. A clearing and forwarding agent normally undertakes the following activities on behalf of a principal:
  1. receiving the goods from the factories or premises of the principal or his agents;
  2. warehousing these goods;
  3. receiving despatch orders from the principal;
  4. arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal;
  5. maintaining records of the receipt and despatch of goods and the stock available at the warehouse; 
Service Tax is payable in respect of the above services.
Q.4   What is the taxable value of services provided by the clearing and forwarding agents?
Ans. The Service Tax is computed on the gross amount of remuneration or commission paid to the clearing and forwarding agent by the principal engaging such agent.

Under Service Tax Rules, it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent . For the services rendered, the C & F agent receives commission or remuneration, which usually consists of two components:
  1. minimum commission on a flat rate or turnover basis depending on the packages/consignments handled, and
  2. a variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal. 
The above two constitute the remuneration or commission paid to the C & F agent by the principal.
Q.5  Is the facility of Centralised registration available to company having C&F services in various towns, states, or areas?
Ans Yes. In cases where C&F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for Service Tax purposes it would suffice to register only such regional or head offices. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the Service Tax liability. 
Q.6 Whether brokers, through whom factories/persons send their goods direct to the customers, could be covered under the expression C & F agents?
Ans. Yes. If factories or persons are engaging brokers for sending their goods directly to their customers, on the basis of orders procured by them, services rendered by brokers would amount to services provided by a Clearing & Forwarding Agents and would be liable for payment of Service Tax.
Q.7 Is the tax on service of C & F agents abolished ?
Ans. No, the service tax on C & F agents is not abolished but the manner of collection of the tax has changed. With effect from 1.9.99, the C & F agents themselves have to apply for registration and pay the Service Tax to the Govt. for services rendered to their clients.
Q.8 What is the value of taxable services in case of ‘turn-key’ contracts handled by the C & F agents ?
Ans. The value of taxable services rendered by a C & F agent is the gross amount charged by such agent from the clients for the services of Clearing & Forwarding operations in any manner. Further, the gross amount means the amount of commission or remuneration received for such services. Therefore, the remuneration received towards ‘turn-key’ contracts would be chargeable on gross basis.
Q.9
  1. Whether the "Arhatiya" (commission agent) working in the mandies (such as vegetable mandi, food grain mandi and fruit mandi) who are providing the service with regard to selling the goods on behalf of agriculture producers and getting commission for the same will be covered under the definition of consignment agents or not ?
  2. Whether consignment agents are included under the category of clearing & forwarding agents ?
Ans. Yes, consignment agents are included under the category of clearing & forwarding agent. The clearing & forwarding agent means any person who is engaged in providing any services either directly or indirectly, connected with the clearing and forwarding operation in any manner to any other persons and includes a consignment agent. Since the consignment agents provide service in respect of clearing & forwarding of a consignment, the services provided by them are chargeable to service tax as C & F agents.

(Authority : S.65 (12) of Finance Act, 1994)
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