Applicability of service tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2011 An Indian Company is providing Business Auxiliary Services to a Foreign Seller(supplier of Goods) in India and receiving Commission Income in Dollars. My Query is:
1. Whether the services provided qualify for export of services as services are provided to Foreign Seller (Services is provided in India) and amount is received in Foreign Convertible currency.
2. Or is it taxable in India?

As i understand the applicability of service tax is based on consumption basis. . In the above the services in consumed in India.

Thanks and regards

Pankaj Agarwal

Pankaj Agarwal (Expert)
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28 October 2011 A service to be classified as export under Export of Services Rules' 2005 have to satisfy the following two conditions:
1. services should be provided from India and used outside India
2. payment for such service is received in convertible foreign exchange.

thus, if the above conditions are satisfied services rendered will be classified as export of service. Further, Business Auxiliary Service falls under category III of Export of Services Rules which states that if the recipient of service is located outside India then the services rendered will be termed as export of service.

In your case as marketing service is rendered to a foreign seller and the commission income is received in foreign currency, it satisfies both the conditions required to classify service as export. Therefore, services rendered are export and are not liable for tax in India.

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