Service tax on Overseas contract-reg

[N Balachandran]

Sir,

When Indian company executes the EPC contract outside India through Sub contractor who is also located outside india on back to back basis, what will be implications under Service tax rules?

The payment to Sub contractor is remitted from India in foriegn Currency and the payment from customer is credited to Bank account in India.

Question is here:

1.When indian Company makes the payment to sub contractor who is located outside india , will it attract service tax ?

2. Is indian company liable to be taxed as receiver in india.

Could you please clarify

Regards

N.Balachandran

 

 

 

[UTTAM DATTA CHAUDHURI]

3.1     Export of Service Rules, 2005(Notification no. 09/2005-ST)

 The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:-

1. such service is provided from India and used outside India; and

payment for such service provided outside India is received by the service provider in convertible foreign exchange

Rule 6A - Export of services:

 

1)        The provision of any service provided or agreed to be provided shall be treated as export of service when-

a.    The provider of service is located in the taxable territory,

b.    The recipient of service is located outside India,

c.    The service is not a service specified in the section 66D of the Act,

d.    The place of provision of the service is outside India,

e.    The payment for such service has been received by the provider of service in convertible foreign exchange, and

f.     The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 2 of clause (44) of section 65B of the Act

 

In the new regime of service tax effective from 01.07.12, no service tax is payable when the services are rendered / provided outside the taxable territory. “Taxable territory” for that purpose has been defined to include the territory of India. Accordingly, no service tax is payable at all if the place of provision of service is outside India. To determine the place of provision of service, “Place of Provision of Services Rules, 2012” have been notified vide notification 28/2012-ST dated 20.06.12. In terms of such Rules , since the place of provision of service is outside India, no service tax is payable at all in our considered view 

[N Balachandran]

Thanks for ur clarification and what is status prior to  1.07.0212, incase we execute the Overseas construction contract through sub contractor who is located outside india.  Are we liable to pay the service tax in India since we are making payment to Subcontractors from India ( Which may be called as import of Service ).    Kindly clarify

 

Regards

 

N.Balachandran

[JAMES PG]

Before 1.07.12, as per the provisions of Taxation of Services (Provided from outside India and received in India) Rules,2006, no tax liability for payment of services related to immovable property situated outside India

[Vijay Chitte]

Since place of provision of service is outside India,  No service tax - see rule 4 of Place of Provision of Service Rules.

AI Summary

Service Tax Not Payable for EPC Contract Executed Abroad Under Export of Service Rules, 2005 and 2012 Provisions An Indian company executing an EPC contract outside India through a foreign subcontractor inquires about service tax implications. Payments to the subcontractor are made from India in foreign currency, while customer payments are credited to an Indian bank account. The discussion clarifies that under the Export of Service Rules, 2005, and the Place of Provision of Services Rules, 2012, no service tax is payable if the service provision occurs outside India. Before July 1, 2012, services related to immovable property outside India were not subject to tax under the Taxation of Services Rules, 2006.