Service tax leviability on Testing and analysis charges recovered from Foreign buyers.

[samiuddin ansari]

Hello Good morning,

My query is whether service tax is chargeable on income received from Foreign parties in Euro for the processing charges i.e Testing and analysis charges made on goods supplied to foreign supplier. Since, services were performed in India i.e. taxable territory and customer situated in foreign territory i.e non-taxable territory. whether service tax is leviable on such income. As CERA audit team is emphasising for payment of service tax alongwith interest and penalty. We solict your valuable guidance in to the matter at the earliest.

Thanks with regard.

[KASTURI SETHI]

Dear Querist,

You can infer on your own on the basis of this judgement.

Read carefully para No.5 of the judgement appended below:- (NOT in your favour)

2017 (5) G.S.T.L. 209 (Tri. - Mumbai)

[Rajagopalan Ranganathan]

Sir,

You have stated that Testing and analysis charges made on goods supplied to foreign supplier. this means that the service provided with respect to export goods. The service provided by you is an input service for export of goods. Therefore no service tax is payable on input service used for export of goods. This is my view.

[YAGAY andSUN]

In this matter the place of provision of service is within India which is a taxable territory and even if you got remittances in EURO, the service tax is required to be paid.

[KASTURI SETHI]

Para no. 5 of the cited judgement also says so.

[Ganeshan Kalyani]

I agree with the views of Sri Rajagopalan Sir. Thanks.

[KASTURI SETHI]

As per Rule 4 (a) of Place of Provision of Service Rules, 2012, the place of provision is taxable territory i.e India (Location where services are actually performed). Hence this case is covered by Rule 4(a) for the purpose of Service Tax in the Pre-GST era.

AI Summary

Place of provision rules determine service tax liability for testing and analysis performed in India, despite payments from foreign buyers. Whether service tax applies to testing and analysis charges from foreign buyers depends on the place of provision: under Rule 4(a) of the Place of Provision Rules, services performed in India have their place of provision in taxable territory and attract service tax, whereas an alternative view treats such testing and analysis as an input service for export of goods and not subject to service tax.