Service Tax on Services rendered in Bhutan by indian suppliers & GOI

[Asked by Guest]

If services are rendered in Bhutan, what is the liability under Service Tax act 1) Both the receiver and provider are situated in bhutan 2) Receiver is in bhutan / provider is in India services related to repair of P&M

[Madhukar N Hiregange]

It appears that rule 8 applies and it is liable in India. However the taxable event is the rendition of service as laid down by the delhi high court.

However one of the principle s of taxation is territorial jurisdiction. Since the activity is outside India the provision may be arguable - see Orient craft decision by MP high court.

[SURESH ASTEKAR]

Dear Minjur Dorji

Since the services are related to repair of plant and machinery, the same appears to be covered by Rule 4 of the Place of Provision Rules and hence the place where the actual service is provided will be the the location where the services are actually performed.  If the repair of plant and machinery is undertaken in Bhutan, then the place of provision of service will be Bhutan and consequently there will be no service tax liability under the Finance Act, 1994.  If the plant and machinery is treated as an immovable property, then also the same would get covered by Rule 5 of the PoP Rules and the place where the immovable property is located will be the place of service which in this case being Bhutan is in non-taxable territory and hence there will be no service tax liability on the repair of P&M located in Bhutan.

Dear all

Plz give me clarification regarding the servictax... for instance if the indian people works in bhutan, will we be liable for service tax. also say something on Consultancy service and hording in India

Dear all

I am happy that you all have responded to my mail and like to thank you all. in addition to this plz provide me with the rule no 8 regarding the service tax. because am not able to get it clearly 

AI Summary

Place of Provision principle: services performed abroad fall outside domestic taxable territory, so no service tax liability.
Whether services rendered in Bhutan by Indian suppliers attract domestic service tax depends on the place of provision and territorial jurisdiction: repair of plant and machinery performed in Bhutan has its place of provision in Bhutan and so does not attract Indian service tax; if the serviced item is treated as immovable property, the location of that immovable property controls and, when in Bhutan, similarly yields no domestic service tax liability.