Export of Service

Service Tax as its name suggests is a tax on services. Service tax in India is regulated by a statute which is exclusive in nature. In other words, it does not bring to tax all the services but only those services which are expressly included in the definition of taxable services in terms of section 65 (105) of Finance Act, 1994 (the Act) are taxable. Services which are not expressly included in the said section 65(105) are not liable to service tax. However, the Central Government is empowered u/s 93 to grant exemption generally or subject to specified conditions , taxable service of any specified description from the whole or any part of the service tax leviable thereon. Accordingly, the Central government has notified Export of Service Rules,2005.

Export of Service Rules,2005.

Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax. [ Rule 4]. Where any taxable service is exported, rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service shall be granted subject to such conditions or limitations and fulfillment of procedure specified in the notification.

[Rule 5]

What is Export of Service

Services are classified into three types for treating as export [Rule 3 (1)]:

i.Services provided in relation to an immovable property situated outside India; ( Category I)

ii. Services which are performed outside India even partly; ( Category II)

iii.Services provided in relation to business or commerce torecipientlocated outside India and in other cases if the recipient is located outside India at the time of provision of such services. If the recipient has commercial establishment or office in India,the order for provision of such service is made from establishment or office located outside India. ( Category III)

Only,the broad parameters have been discussed here. Service specific categorization is enlisted at the end of this article.

The provision of any taxable service specified in sub-rule (1) shall be treated as export of service only when the payment for such service is received by the service provider in convertible foreign exchange. [Rule 3 (2)]

India includes the installation structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof.

Conclusion

Thus a service should be treated as export only if it falls under one of the categories specified under Rule 3(1) and the payment there against is received in convertible foreign exchange.

Classification As per Rule 3(1) of Export of Service Rules.