Category of service - R & D service

[Yatin Bhopi]

Dear experts

We are manufacturer of organic chemicals. We have also research and development center in our factory where we are developing new products.

We have our US base parent company for them only we develop new product. Parent company will be sole owner of discoveries made in R & D center. All expenses incurred by us on R & D center which includes salary of employees reimbursed by parent company through quarterly invoice raised by us.

Please let me know what will be the “Category of service”?

[Rajagopalan Ranganathan]

Sir,

Tje service provided by you is not included in the negative list. Since the service provided to a person located in non-taxable territory you are exporting the service. Hence the same is not liable to service tax.

[Yatin Bhopi]

Yes Sir, we are not paying service tax since this is export of services, but we are going to apply for scrip issue by DGFT. They insist that service which is exported should be added in registration certificate, that's why I need category of service. There is no specific service mentioned as a R & D service.

Consulting Engineer service seems more suitable category of service. Please share your views.

[KASTURI SETHI]

Sh.Yatin Bhopi Ji,

R & D Services is covered under the category of ,"Other Than Negative List". Accounting Code :00441480.

[KASTURI SETHI]

Dear Sh.Yatin Bhopi Ji,

In my view R & D Services cannot be classified under the category of 'Consulting Engineering Services". Best option is, "Other Than Negative List".

[Yatin Bhopi]

Ok. thanks a lot Sir

AI Summary

Export of services: R&D provided to a foreign parent is treated as export and not subject to service tax. Where an Indian manufacturer's R&D centre performs work for a foreign parent located in a non taxable territory, the activity is treated as an export of services and is not liable to service tax; for DGFT registration the appropriate classification is Other Than Negative List rather than Consulting Engineering Services.