2013 (7) TMI 178 - AT - Service Tax

Telecom Services to International Roamers Registered Abroad Qualify as Export Under GST Rules

CESTAT Mumbai held that telecom services provided to international in-bound roamers registered with foreign telecom operators but located in India qualify ... Export of services - Export of Service Rules, 2005 - category III services - recipient location test - place of effective use and enjoyment - benefit accrualExport of services - category III services - recipient location test - benefit accrual - Whether telecom services rendered by the appellant to inbound roamers constitute export of service under the Export of Service Rules, 2005. - HELD THAT: - The Tribunal held that the contract for supply of the roaming services is between the appellant and the foreign home public mobile network (HPMN) operator which pays for the services; there is no contract between the appellant and the individual roaming subscriber. Consequently the foreign telecom operator is the recipient of the service. Telecom services fall under Category III of the Export of Service Rules, 2005, where the relevant factor is the location of the service receiver and the accrual of benefit to that receiver. The Board's Circular No.111/5/2009-ST (para 3) clarifies that for Category III services the phrase 'used outside India' is to be read as benefit accruing outside India to the service receiver; export may be established even if performance occurs in India provided the benefit accrues to a recipient located outside India. The agreement terms, the manner of billing and receipt of consideration in convertible foreign exchange, and the ratio in the Paul Merchants decision lead to the conclusion that the foreign telecom service provider is the consumer/recipient and the services qualify as export. The Tribunal therefore allowed the appeals.The services rendered to inbound roamers are export of service under the Export of Service Rules, 2005, and the appeals are allowed.Final Conclusion: The appeals were allowed: the Tribunal held that international roaming services provided by the appellant are exports under the Export of Service Rules, 2005 (Category III), since the foreign telecom operator is the recipient and the benefit accrues to it; consequential relief and disposal of stay applications were granted. Issues:Common issue in multiple appeals regarding the eligibility for rebate on telecom services provided to international in-bound roamers registered with foreign telecom network operators but located in India.Analysis:1. The appellant claimed rebate on the ground that the telecom services provided should be treated as export of service under the Export of Service Rules, 2005. The lower appellate authority rejected the claims, stating that the service is chargeable to service tax in India as it is provided to a person located in India. The appellant argued that the services were actually rendered to the foreign telecom service provider, not the subscriber, and the consideration was received in foreign exchange, satisfying the conditions for export.2. The appellant relied on the Export of Services Rules, 2005, which categorize taxable services into three categories. The telecom services provided by the appellant fall under category III, which requires the service to be provided to a recipient located outside India and payment received in convertible foreign exchange. The appellant contended that they met these conditions, making the transaction an export as defined in the law.3. The Board's circular clarified that for services falling under category III, the location of the service receiver is crucial, not the place of performance. The benefit of the service should accrue outside India for it to qualify as an export. The appellant's services were considered exports under this interpretation.4. Drawing parallels from UK VAT Circular and Australian Tax Laws, the appellant argued that the service recipient is the foreign telecom service provider, not their subscribers, aligning with the concept that the customer's customer is not the customer of the service provider. The Tribunal's decision in a similar case involving Western Union supported the appellant's argument that the service recipient is the foreign telecom service provider.5. The Tribunal analyzed the agreements between the appellant and foreign telecom service providers, concluding that the services were indeed provided to the foreign service provider located outside India. Therefore, the transaction constituted an export under the Export of Service Rules, 2005. The Tribunal allowed the appeals and disposed of the stay applications accordingly.