service on Professional services in India on behalf of overseas Client

[jagadesh kumar bhojanapalli Kumar]

Dear Sir,

A Unit is having a Factory & HO. The Factory has been registered under Central Excise . The HO team of marketing & technical operators is providing services in India on behalf of 'X' (who is a overseas supplier ) to B & C Indian customers.

A Unit is getting foreign currency towards professional charges from over seas client i.e., 'X' . Is this service income is attracts service tax or not. A unit is having service credit can we adjust/set off this credit ?

Swatch Bharat Cess can avail input tax credit or not ?

Please confirm

thanks & regards,

jagadesh kumar

[DR.MARIAPPAN GOVINDARAJAN]

Credit cannot be available for Swachh Bharat Cess.

In this case for the services rendered to B&C of Indian Customers who issues bills to B&C?

[jagadesh kumar bhojanapalli Kumar]

Further we are clarifying that, X is supplying their product (inputs & consumables) to B & C. while using these inputs by C &C where they require some services that A unit is providing (is nothing but professional deploying to their sites).

A is issuing invoice to directly to X only and X is making foreign remittance to A.

No charges will be paid by the B & C to any one.

[KASTURI SETHI]

'A' is providing service to B & C in India. Both are in taxable territory though foreign exchange is received from X. based outside India. Enjoyment or performance of service is in India. It will not be export of service inasmuch as it does not conform to the parameters laid down under Rule 6 A(1) (Export of service) of Service Tax Rules. As per Place of Provision of Service, Rules, 2012 place of provision is location in taxable territory and also enjoyment of service is in India in terms of Board's Circular No.111/5/2009-ST dated 24.2.2009 as amended vide Circular No.141/10/2011-TRU dated 13.5.2011. Both the circulars are still in force. This is my opinion and I expect opinion from other experts also.

[Ganeshan Kalyani]

The service is provided in taxable territory but the payment is received from foreign party. The provision is clear that service provider and recipient are in taxable territory but what will be the consideration to be considered for the purpose of taxation of service tax.

[Rajagopalan Ranganathan]

A unit is providing service to B & C on behalf of X a customer located in non-taxable territory. A, B & C are located in taxable territory. This means service provider and service recipient are located i taxable territory. Therefore the service rendered is taxable and service tax is payable. The fact that A raises invoice to X and X pays the amount mentioned in the invoice is convertible foreign exchange will not alter the position of law. The fact that the service charges are received in convertible foreign exchange will not affect the liability of payment of service tax. This is my opinion.

[Ganeshan Kalyani]

I agree to the reply given by Kasturi sir and Rajagopalan sir. But what will be the amount on which service tax will be charged. bill is raised by X on B and C. A is just providing service and receives amount from X who is out side taxable territory. will the amount A received from X will be the taxable amount ?

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Yes. The amount received by 'A' from 'X' will be taxable value. Sh.Rajagopalan Ranganathan has already expressed that, "the amount mentioned in the invoice is convertible foreign exchange, will not alter the position of law." In other words, it is taxable.

[Ganeshan Kalyani]

Thanks Kasturi sir for clarification.

[DR.MARIAPPAN GOVINDARAJAN]

Shri Rajagopalan Sir gave a detailed explanation to the query.

[jagadesh kumar bhojanapalli Kumar]

thanks to all advisers who has provided legal opions

regards,

Jagadesh

[Ganeshan Kalyani]

Welcome Sir.

AI Summary

Place of provision rules: services performed and enjoyed in India are taxable despite foreign payment. Services provided in India by a domestic unit to Indian recipients on behalf of an overseas principal are taxable because provider and recipients are located in the taxable territory and enjoyment/performance is in India; payment in foreign exchange to the Indian provider does not make the services exportable, and the taxable value is the amount received by the provider. Input credit for Swachh Bharat Cess is not available.