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

.

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.