CBEC vide Circular 197/7/2016 dated 12 August, 2016 has announced service tax liability on freight forwarders on transportation of goods from India. A Freight Forwarder (FF) arranges for export and import shipments. There could be two possible situations here:-
1. When he acts on his own account.
2. When he acts as an intermediary.
When Freight Forwarder act on his own account as a principle who is providing the service of transportation of goods. In this case he is bearing all the risk and liability for transportation therefore they not covered under the category of intermediary. Freight Forwarder acting as a principal will not be liable to pay Service Tax when the destination of goods is outside India.
When Freight Forwarder act as an intermediary between exporters and transporters i.e. airline/carrier/ocean liner as an agent. In such cases the freight forwarder is merely an agent and the service of FF will be subjected to tax while the services of actual transportation will not liable for service tax under Rule 10 of POPS.
Copy of Order of the board can be accessed through following link.