Service Tax Query on Exporting Services

[Rahul K]

I have small Outsourcing Business, I provide/assist clients with Administrative projects, all my clients are outside India. The payments are transferred in my Current account, 75% in USD and around 25% is transferred in INR. My revenue is gonna be more than 10 Lac.

My query is am I exempt from Service tax as I am exporting my services? And I don't need to do anything on Service Tax part?

[Akash Deep]

Dear Rahul,

for export of services there are several factors and for that you can refer to Rule 6A of the Service tax Rules, 1994. however i will enumerate the relevant factors here.

service provider should be in taxable territory

service receiver shall be out side India.

place of provision of service shall be out side india.

service in question is not a service covered under negative list. (obviously service under negative list is not a subject of charging section hence there shall be no tax liability.)

payment of service has been received in convertible foreign exchange. mark the words has been received.

service provider and service recipient is not merely establishment of distinct person as defined under explanation 3(b) of section 65B(44)

place of provision of service is to be defined as per POP Rules, 2006. as you have not provided the nature of activity in details it difficult for me to comment on this conclusively. Term administrative assistance is too wide. Believe me there are situation where administrative assistance to the client situated outside India may have place of provisions within India (taxable territory). For example, co-ordination of construction work carrying out in india for a client situated outside india or when you assist a client who is situated out side india in doing a road show in india. in both the situaton palce of provisison shhall be in india. describe your nature of activity in detail plz.

Further 75% you are paid in USD that is fine. there are situation where though payment made in indian currency is to be treated as made in foreign exchange. red case of Sun-area real estte pvt. ltd. "

".The payment in rupees from the account of a bank situated in any country (other than a member country of Asian Clearing Union or Nepal or Bhutan) is a manner of receipt of foreign exchange. In the present case, as is evident that the Indian rupees was received thru the account of Deutsche Bank which is situated in foreign country. Therefore, in terms of Regulation 3 made under Section 47 of the Foreign Exchange Management Act, 1999, in the present case the foreign remittance in Indian rupees through Deutsche Bank is the receipt of payment in convertible foreign exchange.

So there may be possibility that 25% payment made in indian currency may not be a problem. you just need to look in to the fine details of the transaction.

the facts provided by you in insufficient to say conclusively that your transaction can be treated as "export of services". just because you are not receiving 25% in Indian currency, one can not say that your transaction can not be export of service. call me for further assistance

Regards

Akash deep

09873463912

[KASTURI SETHI]

Sh.Rahul Ji,

You will have to conform to all the parameters laid down under Rule 6 A Service Tax Rules, 1994 read with POPS Rules, 2012. Usage, performance/enjoyment of service is outside India. 75% Foreign Exchange has also been received. The question revolves around 25% of Indian Currency you received. This 25% cannot negate the benefit of 75%. In this case taxable value against the portion of 25% Indian Currency may not be accounted for towards export of service. Every case law has its own facts and circumstances. This is my view.

[CSSANJAY MALHOTRA]

Dear Mr. Rahul,

I need to understand the place where the service is rendered for Administrative Projects. It may be so that your clients are based abroad, but on their behalf you render service in India.

Once have clarity on above, would give mu opinion.

If the administrative service is rendered outside India and rest of the conditions as specified in mail of Sh. Akashdeep and Sh. K.L. Sethi ji is complied with, I endorse their views.