Taxability of Service payment in foreign currency

[Asked by Guest]

Vide notification no 30/2007- Dated 22.05.2007, effective from 01.06.2007, the word ' PROVIDED OUTSIDE INDIA " has been omitted for Export of Services. Keeping the above, whether any services rendered in INdia and the payment received in INdia in convertible foreign exchange shall be out of Service Tax liability , irrespective the use of services in INdia or Outside India

Though the words "provided outside India' has been omitted in Export of Service Rules, the Rule 3(2)(a) of Export of service Rules still prescribes that the service shall be treated as export of service when such service is "provided from India and used outside India'. Thus, where any service is used in India it squarely fall outside the export of services and taxable and where the usage is in outside India, the service shall be treated as export in accordance with the provisions of rule 3 of Export of service rules.

[Madhukar N Hiregange]

services have to be used outside India and not in India. That condition may at tims be difficult to comply. It should be remembered that when servcies are provided from India outside the purpsoe is to avoid exporting the taxes.

AI Summary

Export of services: services provided from India but used outside India qualify as export; otherwise they remain taxable.
A service rendered from India qualifies as an export of service only when it is provided from India and is used outside India; mere receipt of payment in convertible foreign exchange or receipt of payment in India does not suffice to treat the service as export. Services used within India remain taxable, and evidence of use outside India is the operative criterion for export treatment.