Liability of service tax in case of service recepient from foreign

[Asked by Guest]

Query-1 Fact A body corporate engaged in the business of export of garments, takes the service of “Lab Testing” from the organization situated out side India and making payment in convertible foreign currency. Query: • Whether the body corporate is liable to pay service tax, on the payment to service provider. • In case the service provider, provides the service in India, where as bills are raised from outside India and payment is also made in convertible foreign currency. Then what about applicability service tax. Query-2 Fact A body corporates engaged in the business of export of garments, takes the services from a person residing outside India for procurement of order and coordinating with the buyer and payment is made in convertible foreign currency. Query: • Whether the body corporate is liable to pay service tax, on the payment to service provider.

[Vijay Chitte]

Yes, As per your both the query (Regaring Lab testing and Procuremnet of order), you are coverd under the defination of Imort of service and you are liable to pay service tax, subject to the condition that the service provider should have established his business or has a fixed establishment from wich the service is provided or has his permanent address or usual place of residence in country other than India. According to rule 2(1)(d)(iv)of Service tax Rules 1994 taxable services received from a non-resident were taxable in the hands of the recipient receiving such taxable services in Inida. The explanation pertains to provision of Impor of taxable service is " The service provider does not belong to India and the service receipient belongs to india. In such cases the receipient of taxable services himself is treated as the provider of the taxable services and the services are taxed in the hands of the recipient of service. Vijay Chitte-Claris Lifesciences Limited, Ahmedbad.

[Surender Gupta]

Apparently, the services mentioned in the query are falling within the preview of Import of Services Provisions. However, a detailed study of the facts may bring more clarity of the provisions of the law.

AI Summary

Import of services liability: recipient must pay service tax when non resident provider supplies services to an Indian recipient.
An Indian recipient obtaining services from a non resident-such as overseas lab testing or order procurement-is liable to service tax as import of services, with the recipient treated as the provider when the service provider does not belong to India; applicability depends on whether the non resident has a business or fixed establishment supplying the service or a permanent address/usual residence abroad, per rule 2(1)(d)(iv) of the Service Tax Rules, 1994.