Reverse Charge

[shruti mittal]

Suggest me steps which i should have been taken while deciding the applicability of service tax payable on imported services.

[Joginder Pal]

In general, it is the service provider that is responsible to collect, deposit the service tax and follow the relevent law & procedure . But in the cases where service provider is based abroad, the responsibility of fulfilling all obligations of discharge of service tax has been transferred to the service receiver in terms of Section 66A of Finance Act, 1994, The basic ingredients of applicability of Section 66A is as follow: - 

1)  Service provider should be based abroad,

2) Service recipient should be based in India (including the companies registered in India),

3) Services should be received in India as Service Tax is destination based tax.

Hence once one avails the services covered under the service tax act from the service provider based abroad, the service receiver becomes the service provider and is required to folow all provisions including registration, payment and submission of periodical returns as per the Finance Act, and the rules made thereunder. 

[sv bhasker]

Please see three categories of services under the  provisions of Taxation of Services(Provided from Outside India and Received in India) Rules,2006  read with Section 66A of  Finance Act, 1994 and decide on the taxabilty.

[shruti mittal]

Thank You!!

 

[Priyanka Goyal]

Also see Rule 7 of service tax valuation rules 2006 wherein stated that where  a taxable service is only partly performed in india then the value of taxable service shall be the total consideration paid by the receipient for such services including the value of service partly performed outside india.

[Mahir S]

Please also keep the following points in mind while deciding the applicability of service tax payable on imported services, espeically the second point :-

I) The recipient of service shall be liable to pay tax if the provider of service do not have any established business or a fixed establishment in India.

II) However, a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country (including India).

AI Summary

Reverse charge on imported services: recipient must register and discharge tax when provider is located abroad.
Reverse charge shifts service tax compliance to the Indian recipient when services are provided from abroad and received in India: the recipient must register, declare and pay tax where the foreign provider lacks an Indian establishment. Valuation rules treat partly performed services as taxable on the total consideration, and a provider having a branch or agency in India is treated as having an establishment in India, affecting reverse charge applicability.