Service tax on ocean freight bolt from blue: EEPC

The apex engineering export promotion body EEPC today termed the 4.5 per cent service tax on ocean freight as a "bolt from the blue" for both importers and exporters.
The lobby group also said the move will create serious confusion in the industry apart from hitting the already reeling foreign trade badly as well as have a bearing on the domestic trade and industry.
As per a January 12 notification from Revenue Department, import ocean freight and ancillary charges would be subject to 4.5 per cent service tax. Previously, service providers and receivers located outside domestic taxable territory were exempted from this tax.

"The service tax notification has created serious problems. Besides the additional tax burden, it is difficult for domestic importers to know what the foreign exporters' ocean freight is," said EEPC chairman TS Bhasin.
He also said due to the long new year holidays in China, domestic importers are unable to contact their Chinese sources and as a result they will now have to pay demurrage charges.
While domestic traders importing shipments are affected, the new notification has also hit exporters since they need to import raw materials and then export after a lot of value addition.
He said the EEPC is in discussions with both the finance and commerce ministries to get the order revoked.

"This would result in un-ease of doing business on one hand and on the other will not lead to much of a revenue generation," he said, adding the move is ill-timed given the recent revival in exports.