Service Tax liability on development of Toolings

[Pradeep Jain]

Sir,

We have an export order for components. For the production of the components need to purchase Tools and development of tools . Payment of the tooling and Tooling development will be received in foreign currency from abroad.

The said components will be used in production of the components in India and the said components will export.

Now our query is that:-

Do we need to service tax on Tooling development cost, which develop in India by us, received in foreign currency OR

Exempt from the payment of service tax under Export of Service Rules,2005

.

[Ganeshan Kalyani]

If the process amounts to manufacture then excise duty is payable and if doesn't then service tax is payable.

[YAGAY and SUN]

In this matter you would have to mention the C.E. Duty on the amortised value of tooling while removing the inputs manufactured from such tooling for exports.

[KASTURI SETHI]

Sir,

In my view, in this case enjoyment of service or you may say performance is outside India, Service Tax is not required to be paid. Covered under Export of Service Rules, 2005 read with Place of Provision of Service Rules 2012. Also see Board's Circular No.111/5/2009-ST dated 24.2.2009 and 141/10/2011-TRU dated 13.5.2011

AI Summary

Export of Services exemption may apply to tooling-development paid from abroad, avoiding domestic service tax liability.
Whether foreign-currency consideration for tooling development performed in India for exported components is taxable hinges on classification: if the process amounts to manufacture, excise duty applies; if not, service tax applies. Additionally, excise duty may be payable on the amortised value of tooling when inputs produced using the tooling are removed. A competing position applies the Export of Service Rules, 2005 and Place of Provision Rules, 2012 to treat the service as performed outside India and thus not subject to service tax, with supporting Board circulars referenced.