Commssion received - export of services

[SHANTI NARAIN]

Dear Sir, In case of a Pvt. Ltd. Co. which is wholly owned subsidiary of a foreign company, the commission covering entire expenses of Indian Co. plus margin of 10% from foreign company for procuring orders for them in India. Payment is received in foreign currency for the services rendered to foreign company. Can these services be treated as used outside India under the Export of services Rules, when orders are procured in India.

[Surender Gupta]

Since the services are provided in India, you can not claim as export of service for availing exemption under Export of Services Rules.

[Madhukar N Hiregange]

One alternate view is that the condition of delivery of the service outside India was an impossible one. Considering the change now in Fin Bill 2007 of provding of services in India but used outside India, You could take a view that the change is clarificatory and avail the exemption as export of service. You may have to litgate if you take this view.

AI Summary

Foreign Subsidiary's Commission Services: Do They Qualify as Export Under Export of Services Rules? Finance Bill 2007 in Focus. A private limited company, a wholly-owned subsidiary of a foreign entity, receives commission from its parent company for procuring orders in India. Payment is made in foreign currency. A query was raised on whether these services qualify as export of services under the Export of Services Rules. One response indicated that since services are provided in India, they do not qualify for exemption. Another response suggested that recent changes in the Finance Bill 2007 might allow for the exemption since services are used outside India, though this interpretation could require litigation.