Is service tax applicble on abroad placement?

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Querist : Anonymous

Querist : Anonymous (Querist)

23 September 2012 Is service tax applicble on abroad placement by Indian agency and who will be liable to pay?

Querist : Anonymous

Querist : Anonymous (Querist)

23 September 2012 is service tax applicable on abroad placement?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 Under the Service Tax regime (before the implementation of GST in India on July 1, 2017), the applicability of Service Tax on services related to abroad placement provided by an Indian agency depended on the Place of Provision of Services Rules, 2012. Here’s a detailed explanation:

### Place of Provision of Services Rules, 2012

1. **Rule 3**: The general rule specifies that the place of provision of a service is the location of the service recipient.
2. **Rule 9**: Intermediary services, such as those provided by recruitment agencies, have their place of provision as the location of the service provider (i.e., India in this case).

### Applicability of Service Tax

1. **Abroad Placement Services**:
- **Service Provider Location**: If an Indian agency provides placement services for individuals to secure jobs abroad, the service provider is located in India.
- **Service Recipient Location**: The recipient of the placement service could be either the job-seeking individual or the foreign employer.

2. **Intermediary Services**:
- If the Indian agency is considered an intermediary (facilitating the placement), the place of provision of the service is India, per Rule 9 of the Place of Provision of Services Rules, 2012.

3. **Taxability**:
- Since the place of provision is India, Service Tax would be applicable on the services provided by the Indian agency, irrespective of whether the placement is abroad.

### Liability to Pay Service Tax

1. **Service Provider**: The Indian placement agency providing the service would be liable to charge and collect Service Tax from the recipient and pay it to the government.
2. **Service Recipient**: If the service recipient is located outside India and the payment for services is received in convertible foreign exchange, the service could be classified as an export of service and exempt from Service Tax. However, if the recipient is the job-seeking individual in India, Service Tax would be applicable.

### Transition to GST

1. **GST Applicability**:
- Under GST, the concept of Place of Supply replaces the Place of Provision. For intermediary services, the place of supply remains the location of the supplier (i.e., India).
- Placement services provided by an Indian agency would attract GST unless classified as export of services.

2. **Export of Services**:
- To qualify as export of services under GST, the service must meet certain criteria, including receipt of payment in foreign currency and the service recipient being located outside India.

### Conclusion

Under the Service Tax regime:
- Service Tax was applicable on abroad placement services provided by an Indian agency if the place of provision was considered India.
- The Indian agency providing the service would be liable to collect and pay Service Tax unless the service qualified as an export of services.

Under the GST regime:
- GST is applicable on placement services provided by an Indian agency, with similar conditions for export of services.

For specific cases and to ensure compliance with current regulations, it’s advisable to consult with a tax professional or GST consultant.

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