Export of service

[Kavali Ramanjeneyulu]

Sir, my query is that all the conditions as prescribed in rule 6A of ST rules have been fulfilled except the last one is provider and recepient should not be establishments of the same company. As per section 66B of FA , tax is chargeable on service when both provider and recepient are located in the taxable territory. Then, under which section , export of service becomes taxable if tax is to be demanded on export of service due to non fulfillment of one condition. I request for reply sir.

[Rajagopalan Ranganathan]

Sir,

According to Explanation to clause (44) of Section 65 B of Finance Act, 1994 though establishment of a person in taxable territory (India) and another establishment of same person in a non-taxable territory have been specified as distinct person, the transaction between such establishments have not been recognised as export under rule 6A of Service Tax rules, 1994 for the reason that one branch cannot provide service to other of the same person. Therefore under the above mentioned rule the transaction is not treated as export.

[KASTURI SETHI]

You are required to fulfill all the conditions laid down under Rule 6A of ST Rules. Law is very much clear. No export benefit is available to you.Charging Sections are 66, 66A and 66 B of the Finance Act, 1994 depending upon the nature of service. I agree with the views of Sh.Ranganathan, Sir.

[Kavali Ramanjeneyulu]

But, sir in case of export, recepient is outside taxable territory. So, how can we apply 66b which is applicable only in case of services provided within the taxable territory,? My opinion is that even if conditions a as stipulated in not6A are not fulfilled, tax can not be demanded on export of service. PL clarify sir

[KASTURI SETHI]

I do not agree with you. There are so many factors to qualify as export of service. Only receipt of foreign exchange would not suffice.

[Kavali Ramanjeneyulu]

Ok sir, my query is not yet clarified. When recepient is outside taxable territory, service can not be said to have been provided within the taxable territory then, 66B will not be applicable to demand tax. In this situation ,which provision to be invoked. PL clarify sir

[KASTURI SETHI]

When any service does not qualify as export of service, treat that service as provided within India for the purpose of payment of GST.

[Mahadev R]

My view:

Section 66B:- There shall be levied a tax (hereinafter referred to as the service tax) at the rate of Fourteen per Cent on the value of all services, other than those services specified in the negative list,provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

In this confirm whether place of supply according to POPS rules is outside taxable territory. If answer is yes, then no service tax payable. However, as one of the clauses in Rule 6A is not satisfied, it would not be treated as export + it can be a exempt service. Any credit on inputs/ services used in providing such services would be disallowed.

[Kavali Ramanjeneyulu]

Yes sir, I agree with mahadev,s view. My view is also that, if recepient and place of provision is outside India, St is not leviable even if other conditions of rule 6A are not fulfilled. Agreed or not sir.

[KASTURI SETHI]

Pl. read Sh.Mahadev R's views deeply.

[Kavali Ramanjeneyulu]

B1.8 With effect from 01.07.2012, export of services are not to be taxed under Service Tax, as per Place of Provision of Services Rules, 2012. If the assessee has included the amount of export of service in column B1.1, he has to fill up said amount in column B1.8 also for claiming deduction of said amount from the gross amount. However, there may be cases where ST-3 return for the period prior to 01.07.2012 is to be filed by service providers or recipient of service, as the case may be. They are also required to fill up this column for furnishing the amount charged against the export of services made before 01.07.2012.

Board's instruction on filling up ST3. According to this , export of service is not taxable. pl comment sir

[Kavali Ramanjeneyulu]

In continuation of my previous submission, my stand is confirmed that tax is not leviable on the service for which recepient is outside India asper as per rule 3 of POPS and sec 66B and if credit has been taken , the same needs to be reversed. In my case, credit has not been taken. Finally, my understanding is that even if conditions of rule 6A are not fulfilled, tax can not be demanded on export of service .

[KASTURI SETHI]

Have you seen case law reported as 2019 (28) GSTL 315 (Tri.Mumbai) = 2019 (10) TMI 327 - CESTAT MUMBAI and Board's Circular No.111/5/2009-ST dated 24.5.09 as amended ?

Although the period is prior to POPS Rules, yet these are worth reading.

I am of the view that you cannot ignore Rule 6A of ST Rules notwithstanding POPS Rules.

AI Summary

Export of service: failing prescribed export conditions may forfeit export status and allow service tax to be charged.
Whether a service is an export depends on satisfying all Rule 6A conditions and the Place of Provision rules; failure of any Rule 6A condition can disqualify export treatment and lead to treating the service as provided within India for service tax charging purposes, with attendant denial or reversal of input tax credit and reporting consequences.