Is Service Tax payable on Services Received outside India under RCM?

[Sumeet Tholle]

Dear Sir,

One of the my client ( bases in India) in the business of ginning and pressing of Cotton bales. They supply cotton bales to textiles mills at Pakistan. For Sale/recovery purpose, they pay commission in foreign exchange to brokers of Pakistan.

Department demanding Service Tax under RCM. Is department correct ?

I am of view that as services received outside India, hence no service tax payable.

Pl. Guide.

The period involve is before Jully 2012 also and after July 2012 also.

Thanks.

Sumeet Tholle,

CA

AI Summary

Place of provision rules determine whether cross-border commission services attract reverse charge service tax on the Indian recipient.
Taxability of commission paid to foreign commission agents depends on the Place of Provision of Services Rules-services provided from outside India but received in India may attract service tax under the Reverse Charge Mechanism. A government exemption limited relief for exporters by exempting service tax up to a notional percentage of FOB value subject to strict documentation, registration, and return conditions and disallowance of CENVAT credit. Administrative circulars also permitted inclusion of commission within FOB up to an established limit for export benefit calculations; subsequent changes to the intermediary definition affected applicability of the exemption.