2013 (8) TMI 806 - AAR - Service Tax

Exported Services Ruling: Indian subsidiary's marketing services to US/China qualify.

The ruling concluded that the marketing and support services offered by an Indian subsidiary to its US and China counterparts constitute exported ... Taxability of Marketing and Support Services - Place of provision of services - What would be the place of provision of the marketing and support services in terms of the Place of Provision of Service Rules 2012 introduced vide Notification No. 28/2012 – S.T. - Held that:- The place of provision of service to be provided by the applicant to Tandus China and Tandus US shall be the location of the service recipients, i.e. in China and US respectively, in accordance with Rule 3 of Place of Provision of Service Rules, 2012; and The provision of service by the applicant to the two recipients named above will amount to export of service within the meaning of Rule 6A of Service Tax Rules, 1994 - It hardly needed to be added that if any material difference was noticed in the facts relating to the transaction when the actual determination was made, it would be open to the concerned authorities to act appropriately according to law. Export of Taxable Services - Notification No. 2/94 - Whether the marketing and support services would qualify as export of taxable services under Rule 6A of the Service Tax Rules , 1994 introduced vide Notification No. 2/94 – S.T. - Held that:- The provisions of Rule 6A of Service Tax Rules, 1994 were satisfied in the case and therefore this would be a case of export of service. Issues:1. Determination of the place of provision of marketing and support services provided by an Indian subsidiary to its US and China counterparts.2. Qualification of the marketing and support services as export of taxable services under the Service Tax Rules, 1994.Issue 1 - Place of Provision of Services:The case involved an application by an Indian subsidiary seeking an advance ruling on the place of provision of marketing and support services provided to its US and China counterparts. The subsidiary, established to enhance sales in India, proposed agreements with the US and China entities for various services, including marketing, demonstration, communication, and management. The subsidiary would receive service fees in foreign exchange, and it clarified that no payments would be received from the dealers of the US and China. The applicant argued that the services would be provided from India to the US and China, falling under Rule 3 of the Place of Provision of Service Rules, 2012. The Commissioner agreed that the services would be considered export, as the benefit accrues outside India. The ruling held that the place of provision would be the location of the service recipients, i.e., the US and China.Issue 2 - Qualification as Export of Services:Regarding the qualification of the services as export under Rule 6A of the Service Tax Rules, 1994, the applicant satisfied the conditions for export of service. The applicant's location in India, recipients located outside India, service not in the negative list, place of provision outside India, payment in foreign exchange, and independent legal entities status all aligned with the requirements of Rule 6A. The ruling confirmed that the services provided to the US and China entities would indeed qualify as export of service under Rule 6A.In conclusion, the ruling determined that the marketing and support services provided by the Indian subsidiary to its US and China counterparts would be considered as exported services, meeting the criteria set forth in the Place of Provision of Service Rules, 2012, and Rule 6A of the Service Tax Rules, 1994. The ruling emphasized that any discrepancies in the transaction facts would require appropriate actions by the authorities in accordance with the law.