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

Export of services: services provided in India generally not export; amendment allows 'used outside' claim but risks litigation The issue is whether commission services performed in India for a foreign parent and paid in foreign currency qualify as export of services. One view denies export treatment because services are provided in India; an alternative view invokes the Finance Bill 2007 change allowing services provided in India but used outside India to be treated as exported, permitting an exemption claim though exposing the taxpayer to litigation risk.