Service Tax applicability on Maintenance services

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A US based company has supplied various equipments in the past to various customers in India. Later on it forms a 100% subsidiary company in India,which is pvt ltd co. The Indian company undertakes the maintenance of the equipment controlled/in consulation with the foregin company earlier supplied by the foreign holding company and invoices the holding company for the service charges. Now the issue is whether service tax is payable on the maintenance serivces. I understand that as per the Export of services Rules the Indian company is not liable to pay service tax because In relation to services listed in Annexure 4.2, the following conditions need to be satisfied to fall under Export of services. 1. Taxable services must have been performed either fully or in part, outside India. In this case, both the foreign as well the Indian company is performing the service. Hence the service is performed in part outside India. 2. service is delivered and used outside India. The ultimate user is the foreign company . 3. payment received in foreign exchange. Kindly advice if my thinking is correct.

AI Summary

Service Tax Applies to Maintenance Services by Indian Subsidiary under Export of Services Rules, 2005. A US-based company supplied equipment to customers in India and later established a wholly-owned subsidiary in India to maintain this equipment. The Indian subsidiary invoices the foreign parent company for maintenance services. The query concerns whether service tax is applicable on these services. The consensus among respondents is that the service does not qualify as an export of services under the Export of Services Rules, 2005. This is because the maintenance services are performed entirely in India, despite payments being received in foreign currency. Therefore, service tax is payable on these services rendered within India.