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Service tax on import and export of service

Prajyot (na) (39 Points)

30 December 2015

Our LLP company providing hardware renting service (we rent hardwares from international provider and re-rent to other clients) for domestics and international clients. (Already crossed 10L limit)
1. Our hardware resources are placed outside of India.
2. We receive payment via wire transfer
3. Our service provider have no presence in India
4. We pay our service provider via wire transfer

In above case we have to pay service tax for international clients too? Till a date we are paying service tax for domestic clients only.

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3 Replies

Mayur Kashinpure (Student) (341 Points)
Replied 30 December 2015

The place of provision of service in your case shall be location of service receipient (See Rule 3 of Place of Provisions of Sevices Rules, 2012). Since the location in your case is outside India (i:e outside taxable territory), service tax shall not be charged on it.

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Prajyot (na) (39 Points)
Replied 30 December 2015

Originally posted by : Mayur Kashinpure
	The place of provision of service in your case shall be location of service receipient (See Rule 3 of Place of Provisions of Sevices Rules, 2012). Since the location in your case is outside India (i:e outside taxable territory), service tax shall not be charged on it.

My friend given following rules are they correct? As per him it is liable to pay service tax

1.Import of Service:

In Service Tax Law, where the concept of “Service Provider” and

“Service receiver” are there, tax is generally to be paid by service

provider. However, in respect of taxable services notified under sec

68(2) read with Rule 2(1)(d) of STR,1994, tax is payable by the

prescribed person. one of the notified service is:

"Taxable services received by any person in India from a country

other than India – the recipient of such service in India"

Hence service tax is payable by recipient for Import of service from outside india.

2.Export of Service:

The rules governing export of services was Export of Service Rules,2005 and rules governing Import of Service was Import of Service Rules,2006 however in the light of new service tax law this rules wouldnot be applicable w.e.f1st July 2012

Now the Place of Provision of Rule,2012 has to be considered to ascertain the taxability in case of International transactions hence as per this rule service tax is payable by ascertaining the place of provision.

Place of provision of specified services.-

The place of provision of following services shall be the location of the service provider i.e. service tax will be payable by Service provider.

(a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) Online information and database access or retrieval services;

(d) Service consisting of hiring of means of transport, upto a period of one month

Mayur Kashinpure (Student) (341 Points)
Replied 31 December 2015

Originally posted by : Prajyot
	My friend given following rules are they correct? As per him it is liable to pay service tax 1.Import of Service: In Service Tax Law, where the concept of “Service Provider” and “Service receiver” are there, tax is generally to be paid by service provider. However, in respect of taxable services notified under sec 68(2) read with Rule 2(1)(d) of STR,1994, tax is payable by the prescribed person. one of the notified service is: "Taxable services received by any person in India from a country other than India – the recipient of such service in India" Hence service tax is payable by recipient for Import of service from outside india. 2.Export of Service: The rules governing export of services was Export of Service Rules,2005 and rules governing Import of Service was Import of Service Rules,2006 however in the light of new service tax law this rules wouldnot be applicable w.e.f1st July 2012 Now the Place of Provision of Rule,2012 has to be considered to ascertain the taxability in case of International transactions hence as per this rule service tax is payable by ascertaining the place of provision. Place of provision of specified services.- The place of provision of following services shall be the location of the service provider i.e. service tax will be payable by Service provider. (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) Online information and database access or retrieval services; (c) Intermediary services; (d) Service consisting of hiring of means of transport, upto a period of one month

Service Tax as per Section 66B of Finance Act, 1994 is chargable only if service is provided in a taxable territory. For the purpose of deciding the place where the services are provided, place of provision of services rules are made.
Since in your case, the place of provision is out of India (i:e outside taxable territory), service tax cannot be charged.
Further, the applicability of reverse charge applies only if service tax is payable. Since, no liability is arising out if this, how reverse charges can be invoked?
I would also like to mention that you have highlighted sub rule (b) of Rule 9 of Place of Provision of Services Rules, 2012. How is this applicable since you have mentioned that you are providing renting service to your clients? Please explain.