Import of service
This query is : Resolved
06 February 2012
We have firm in India registered, we have bought one Firm outside india, and took service of person outside india, has rendered service outside India., Payment made to them in foreign cur. Will this be Taxable service?
09 February 2012
Service received is in nature of consultancy , due diligence , Advice for acquisition. And such service have been rendered in year 2007-08., Will it taxable ?
28 July 2024
For the situation described, where a firm in India has acquired a foreign firm and received consultancy services from a person outside India in 2007-08, there are several important considerations regarding the taxability of the service under the **reverse charge mechanism**.
### **1. Taxability of Imported Services Under GST**
Under the GST regime, which came into effect on July 1, 2017, the reverse charge mechanism applies to the import of services. However, since your service pertains to the year 2007-08, it would fall under the **Service Tax regime** which was applicable before the introduction of GST.
**Key Points to Consider:**
#### **A. Service Tax Regime (Pre-GST)**
1. **Reverse Charge Mechanism (Service Tax)**
- Under the Service Tax regime, reverse charge mechanism was applicable to certain services received from abroad. The recipient of the service in India was required to pay Service Tax on such services.
2. **Place of Provision of Service (POPS) Rules**
- For services rendered from outside India, the Place of Provision of Service (POPS) rules determined if the service was taxable in India. For consultancy and advisory services, the place of provision was often where the service recipient was located.
3. **Taxability in 2007-08**
- If the service was rendered and the recipient was located in India (even if the service was rendered outside India), Service Tax was generally applicable under the reverse charge mechanism.
- The taxability would depend on whether the service falls under any exemptions or specific rules applicable at that time.
4. **Documentation and Compliance**
- Proper documentation of the service agreement, invoices, and payments is crucial. You would need to demonstrate that the service was received and utilized in India.
#### **B. GST Regime (Post July 1, 2017)**
1. **Current GST Applicability**
- Under GST, consultancy and advisory services received from abroad would be subject to reverse charge. The recipient in India is required to pay GST and can claim input tax credit, provided the services are used for business purposes.
2. **For Services Rendered Before GST**
- Since your services were rendered in 2007-08, GST would not apply. However, Service Tax rules from that period would govern the taxability.
### **2. Specific Scenario: Acquisition-Related Services**
- **Nature of Service**: The services mentioned (consultancy, due diligence, advice for acquisition) would typically fall under professional services, which were taxable under Service Tax if received from abroad.
- **Payment in Foreign Currency**: Payment in foreign currency does not affect the taxability. The key factor is the place of provision and the service recipient's location.
### **Summary**
- **For 2007-08**: The service would be taxable under the Service Tax regime if it was received by an Indian entity. The reverse charge mechanism would apply, and Service Tax should have been paid on such services.
- **Current GST Perspective**: For services received after July 1, 2017, GST under reverse charge would apply.
- **Action Steps**:
- **Review Records**: Check historical records for Service Tax compliance and payments.
- **Consult a Tax Advisor**: For a detailed review of past compliance and to address any potential issues related to Service Tax for the year 2007-08.
For accurate advice tailored to your specific situation, especially given the historical context and potential complexities, consulting with a tax professional or legal advisor would be prudent.
### **1. Taxability of Imported Services Under GST**
Under the GST regime, which came into effect on July 1, 2017, the reverse charge mechanism applies to the import of services. However, since your service pertains to the year 2007-08, it would fall under the **Service Tax regime** which was applicable before the introduction of GST.
**Key Points to Consider:**
#### **A. Service Tax Regime (Pre-GST)**
1. **Reverse Charge Mechanism (Service Tax)**
- Under the Service Tax regime, reverse charge mechanism was applicable to certain services received from abroad. The recipient of the service in India was required to pay Service Tax on such services.
2. **Place of Provision of Service (POPS) Rules**
- For services rendered from outside India, the Place of Provision of Service (POPS) rules determined if the service was taxable in India. For consultancy and advisory services, the place of provision was often where the service recipient was located.
3. **Taxability in 2007-08**
- If the service was rendered and the recipient was located in India (even if the service was rendered outside India), Service Tax was generally applicable under the reverse charge mechanism.
- The taxability would depend on whether the service falls under any exemptions or specific rules applicable at that time.
4. **Documentation and Compliance**
- Proper documentation of the service agreement, invoices, and payments is crucial. You would need to demonstrate that the service was received and utilized in India.
#### **B. GST Regime (Post July 1, 2017)**
1. **Current GST Applicability**
- Under GST, consultancy and advisory services received from abroad would be subject to reverse charge. The recipient in India is required to pay GST and can claim input tax credit, provided the services are used for business purposes.
2. **For Services Rendered Before GST**
- Since your services were rendered in 2007-08, GST would not apply. However, Service Tax rules from that period would govern the taxability.
### **2. Specific Scenario: Acquisition-Related Services**
- **Nature of Service**: The services mentioned (consultancy, due diligence, advice for acquisition) would typically fall under professional services, which were taxable under Service Tax if received from abroad.
- **Payment in Foreign Currency**: Payment in foreign currency does not affect the taxability. The key factor is the place of provision and the service recipient's location.
### **Summary**
- **For 2007-08**: The service would be taxable under the Service Tax regime if it was received by an Indian entity. The reverse charge mechanism would apply, and Service Tax should have been paid on such services.
- **Current GST Perspective**: For services received after July 1, 2017, GST under reverse charge would apply.
- **Action Steps**:
- **Review Records**: Check historical records for Service Tax compliance and payments.
- **Consult a Tax Advisor**: For a detailed review of past compliance and to address any potential issues related to Service Tax for the year 2007-08.
For accurate advice tailored to your specific situation, especially given the historical context and potential complexities, consulting with a tax professional or legal advisor would be prudent.
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