Provision of IT (software) service from India_Service Tax payable?

[Yatin Bhopi]

Dear experts,

We propose to provide IT ( software )related trouble shooting services from India to our other affiliate company located across the globe, for which we will be recovering some fees by raising invoices for the services provided to them from India. The affiliate will place the service request from outside India whenever required. We will receive the fees in convertible foreign exchange.

Are we require to pay service tax on the same in India? if yes in which service category?

[Guest]

There is no liablilty to pay service tax as the place of provision of service is outside india as per Rule 3 of POP Rules. It also qualifies for export of service provided you fulfill the below conditions given in Rule 6A of Service tax rules:

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 establishment of a distinct person in accordance with item (b) of Explanation 2 of clause (44) of section 65B of the Act.

 

If it qualifies as export of service, you are entitled to rebate of service tax paid on input services as per section 93A of Finance Act 1994

 

AI Summary

Export of service: IT troubleshooting from India is not subject to service tax when place of provision is outside India. IT troubleshooting services supplied from India to an overseas affiliate are not taxable if the place of provision of service is outside India. The transaction qualifies as export of service only if the provider is in the taxable territory, the recipient is outside India, the service is not an excluded specified service, payment is received in convertible foreign exchange, and the provider and recipient are not merely establishments of a distinct person; qualifying exporters may claim rebate of service tax on input services.