Service tax on domain & hosting under oidar new rules.

[Asked by Guest]

Dear sir,

We are domain & hosting reseller proprietorship firm.

Now one of our provider "Directi Web Technology Pvt. Ltd. which is an Indian entity" will start charging Service Tax of 15% to us from 1st Dec.

- And we are already charging 15% Service Tax from our client.
Can we get any relaxation or reverse charge benefit from Government?

- Another Hosting Server provider which is in USA. We will start paying Service Tax on it from 1st Dec.
Can we get any relaxation or reverse charge benefit from Government?

Regards,
Vibhukant

[Rajagopalan Ranganathan]

Sir,

Query: -1: You cannot get any relaxation. Only facility available is availability of credit of service tax paid by you to Directi Web Technology Pvt. Ltd. under Cenvat Credit Rules, 2004 and you can utilize the same for discharging service tax liability by you on the output service provided by you.

Query: -2: If the service provided by Hosting Server provider which is in USA and you use it for commerce, industry or any other business or profession, then it will be treated as import of service and you have to pay service tax @15% under reverse charge mechanism. Again you can take credit of service tax paid on REM and utilize the same for payment of service tax on any output service in which the said service is used as input service.

Dear Rajagopalan Ranganathan sir,

- First of all thanks for speedy reply.

- Will it be 100% adjustment in both the cases?

Regards,
Vibhukant

[Ganeshan Kalyani]

Yes full credit is eligible .

Thanks once again to both of you and TaxTMI.Com

- Mr. Rajagopalan Ranganathan
- Mr. Ganeshan Kalyani

Last Question : Can any CA can handle both the adjustments easily?

Dear sir,

We do have some Foreign hosting clients.
Is Service Tax chargeable to them under New OIDAR rules?
Or we have to provide any details to Govt. about this foreign payment received.

Regards,
Vibhukant

[Ganeshan Kalyani]

If you are providing service to your Foreign clients then the service would amount to export of service . And service tax is not applicable on export of service. Thanks .

Dear sir,

We have applied as Service Provider & Service Recipient in Service Tax ST1 Form.
Do we have to apply for "Input Service Distributor" also to avail "Cenvat Credit" or "RCM" ?

Thanks,
Vibhukant

AI Summary

Reverse charge on imported hosting services applies, with tax payable under reverse charge and eligible for input credit.
Payments to an Indian domain/hosting supplier are taxable but eligible for cenvat credit under the Cenvat Credit Rules to offset the reseller's service tax liability; payments to foreign hosting providers are treated as import of service and attract tax under the reverse charge mechanism, with such tax also eligible for credit. Services exported to foreign clients are not subject to service tax. The discussion notes registration as service provider/recipient and queries the need for Input Service Distributor status, while emphasising credit availability rather than exemption.