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June 2010

No Service Tax on Container Detention Charges — Circular No. 121/3/2010-ST, dated 26-4-2010.

By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Tarun Ghia, Brijesh Cholera, Pratik Mehta | Chartered Accountants
Sejal Vasa | Company Secretary
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Part B : Indirect Taxes


42 No Service Tax on Container Detention Charges — Circular
No. 121/3/2010-ST, dated 26-4-2010.

By this Circular it has been clarified that in respect of
marine containers, full load of container is taken out of port and activity of
stuffing or de-stuffing is carried out at the place of exporter/ importer. The
shipping companies provide a pre-determined period within which the container is
to be returned which is called the pre-holding period. In case there is delay on
the part of the customer in returning the container, the charges known as
‘detention charges’ are collected. Such charges can best be called as ‘Penal
Rent’ for retaining the container beyond predetermined period. In such view of
the matter, to retain container beyond predetermined period is neither service
provided in the nature of Business Auxilliary Service, nor is it an
infrastructural support in the nature of Business Support Services. Therefore,
the amount collected as detention charges is not chargeable to service tax.


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