service tax for services provided to overseas client in India

[Rasesh Amin]

We are manufacturer of engineering items and service provider for erection, commissioning, installation, job work, information technology and business auxiliary services to our clients. We have one U.K. based client for whom we have acted as:

1. Agent and Marketing & Sales Support Services.
2. Communicate all the relevant information to the customer in connection with the services rendered;
3.  Working with the facility managers, in-house architects and / or designers, contractors of the customers of Service recipients in order to assist the customers in selecting the products, based on factors such as budgets etc.;
4. Communicate to the Service Recipients about the customer’s comments / decision / orders etc;
5. Provide written reports regarding client contacts, market development, competition, pricing, advertising, potential or new market for the new competing products and their pricing.
6. Liaison for collect order, on their behalf from one Indian company in India. The order was to supply of goods from U.K. to India.

We are eligible for commission on total order value. We seek your opinion about the applicability of service tax on the above transaction based on new export of service rules inserted in Service tax rules & new Place of provision of services rules 2012:

As per Rule 6A (Export of Services) of Service Tax: (1) The provision of any service provided or agreed to be provided shall be treated as export of service when, -

(a) The provider of service is located in the taxable territory,

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act,

(d) The place of provision of the service is outside India,

(e) The payment for such services has been received by the provider of service in convertible foreign exchange, and

(f) The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.

Our situation in above context is:

(a) The provider of service is located in the taxable territory,                       : YES COMPLIED

(b) The recipient of the service is located outside India,                                                 : YES COMPLIED

(c) The service is not a service specified in the section 66D of the Act,     : YES COMPLIED

(d) The place of provision of the service is outside India,                                               : As per Rule 3 of PLACE OF PROVISION OF SERVICES RULE, 2012PLACE OF PROVISION GENERALLY - The place of provision of a service shall be the location of the recipient of service: Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service

(e) The payment for such services has been received by the provider of service in convertible foreign exchange, : YES COMPLIED

(f) The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.: YES COMPLIED

[Arun Kumar Singh]

If place of provision is out side India then no need to pay service tax. in respect of any taxable services provided or agreed to be provided by any person who is located in non-taxable territory and received by any person in the taxable territory you need to pay service tax under reverse charge system vide notification no. 30/2012-ST.

AI Summary

Export of services treatment applies when place of provision is outside India and all export conditions are met. Provision of commission, marketing and liaison services to an overseas recipient qualifies as export of service only if the provider is located in the taxable territory, the recipient is located outside India, the service is not an excluded service, the place of provision is outside India, payment is received in convertible foreign exchange, and the parties are not merely establishments of a distinct person; where these conditions are met the service is not subject to domestic service tax, though inbound supplies received in India from non taxable territories may fall under the reverse charge mechanism.