export of web site deveopment service

[Satbir singh wahi]

export of web site development service to Netherlands (Holland) is being done. Pls tell the procedure to be followed so the the service is exempt under export service.Invoice can be raised in INR and payment is received in bank from overseas buyer.

[Rajagopalan Ranganathan]

Dear Shri. Wahi,

Export of service is governed by Rule 6 A (1)  of Service Tax Rules, 1994 which states that-

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 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 service 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 ²[Explanation 3] of clause (44) of section 65B of the Act.

Clause (e) of the above rule imposes the condition that payment for such service has been received by the provider of service in convertible foreign exchange. Though you have to raise invoice in convertible foreign exchange, Otherwise, it will not be treated as export of service.

However, if the amount is received by your banker in convertible foreign currency and he credits it to your account in India rupees then you can be treated as exporter of service as held by CESTAT in

STERLING HOFFMAN SOFTWARE CONSULTANT P. LTD Versus C.C.E., VADODARA  2013 (4) TMI 239 - CESTAT, AHMEDABAD = [2012 (28) S.T.R. 253 (Tri. - Ahmd.)​]

 

[YAGAY and SUN]

Dear Satbir,

In addition to the above reply as per the RBI guideline, Indian Exporter may issue invoices in INR provided the remittance should be paid by the foreign client in foreign currency through there VOSTRO Account.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Export of service: receipt in convertible foreign exchange required for exemption; INR invoice acceptable if bank credits rupees.
Export of service qualifies only when specified conditions are met: provider in taxable territory, recipient outside India, service not excluded, place of provision outside India, payment received in convertible foreign exchange, and parties not mere establishments of a distinct person. The convertible foreign exchange receipt condition is crucial; however, invoicing in INR may be acceptable where the banker actually receives convertible foreign currency and credits the exporter's account in rupees (including remittances via VOSTRO accounts), as reflected in an appellate decision and RBI guidance.