Applicability and credit of service tax

[Guest]

Dear Sir, We are dealing in all types of IT related services.Recenty our staff has got training from Australian based company for which they charged us US$ 30000.Are we liable to pay service tax & if yes can we get credit of the service tax paid since its related to our business. Whether we have to deduct any TDS while making any foreign outward remmitance & at what rate.

[Ravi Chopra]

Regarding, Service Tax, since the services are in the nature of commercial coaching or training, the same is not liable to tax in India if wholly provided outside India. On the other side, if it is held as "consulting engineering service" the same is taxable in India as recipient of service is situated in India. Yes, if you pay service tax on such service, the same qualifies as Input service if all other conditions are satisfied for the purpose of Cenvat Credit. Regarding Income Tax, apparently, you may not be liable to deduct TDS. But, further study is necessary in respect of the transaction and DTAA provisions read with Income Tax Act, 1961.

AI Summary

Taxability of imported services: training outside India not taxable; consulting services may be taxable for the Indian recipient. Taxability of imported services depends on nature and place of provision: training wholly provided outside India is not taxable as commercial coaching, whereas the same service, if treated as consulting engineering service, is taxable because the recipient is in India. Service tax paid may qualify as Cenvat credit if statutory input service conditions are met. Deduction of tax at source appears not to be required, but applicability of TDS must be verified under the Income Tax Act and applicable tax treaties.