services of consultant to us based company

[Abhishek Panicker]

Let me make it clear. I am not a Tax practitioner. Considering that I used to work long ago in the Indirect Tax domain, I was asked a service tax query. I thought I could use this platform to assist the queryist. The individual got an offer of being appointed as a Marketing Consultant to a US based company. They would pay him in USD every month and the foreign company does not have any office in India. Is this Consultant required to pay service tax? My opinion is that since the service recipient is in a non-taxable territory and the consulting fees are received by the provider in USD there cannot be any liability of ST. Informed netizens on this forum may advise me. I found this link also useful http://www.business-standard.com/article/sme/service-tax-not-payable-if-recipient-of-service-is-located-abroad-115030901142_1.html

Thanks in advance.

[DR.MARIAPPAN GOVINDARAJAN]

Please confirm whether the service is rendered in India or outside India. If it is performed in India to the person outside India it is payable under reverse charge mechanism. If it is performed outside India and to the person outside India no tax is payable.

[Rajagopalan Ranganathan]

Sir,

According to rule 6A of Service Tax Rules, 1994

The provision of any service provided or agreed to be provided shall be treated as export of service when,-

(a) the provider of service is located in the taxable territory ,

(b) the recipient of service is located outside India,

(c) the service is not a service specified in the section 66D of the Act (Negative List),

(d) the place of provision of the service is outside India,

(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and

(f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3] of clause (44) of section 65B of the Act.

is export of service. In your query you have stated that "the individual got an offer of being appointed as a Marketing Consultant to a US based company. They would pay him in USD every month and the foreign company does not have any office in India." Therefore it is clearly export of service and no service tax is payable by the individual. Even if the individual provides the service with respect to India Markets then also it is export of service and hence no service tax is payable.

[Ganeshan Kalyani]

Sir, if the service recipient is abroad then the service as rendered by the consultant in India amounts to export of service. Hence service tax is not applicable. In case if service is provided to Indian recipient then service provider shall have to pay tax.

[Akash Deep]

Dear Sir,

you are right, this transaction is not covered under scope of charging section as POP is out side India. i do not know why it is being questioned that whether services are performed or rendered in India as in era of POP rules such question is irrelevant. transaction also qualify as export of service under Rule 6A of STR.

As your friend is not liable to pay service tax he is not required to take registration with service tax department and file return. However, if he want to get refund of input tax under Rule 5 of CCR, which he is eligible, he should get registered with service tax department and file nil return.

AI Summary

Export of service: consultancy paid in foreign exchange qualifies as export under rule criteria and is not subject to service tax. A marketing consultancy provided by an Indian-based provider to a US-based recipient, with payment in convertible foreign exchange and where the place of provision is outside India and the service is not on the negative list nor between distinct establishments of the same person, qualifies as an export of service under Service Tax Rules and does not attract service tax; registration is not required unless the provider intends to claim input tax refund, in which case registration and filing of returns are necessary.