Service tax against export
This query is : Resolved
23 June 2013
Company A is engaged in exporting services of software design and is not registered for Service Tax as the prescribed limit for service tax is not crossed.
Company A outsources the work to Company B but Company B is registered under Service Tax and hence is imposing service tax on company A at the time of presenting an Invoice.
Can Company A avail refund for this service tax ? OR
Is there any alternate solution to avoid service tax ?
Also, please note that Company A is only dealing with exports and has no local sales to avail credit.
Company A outsources the work to Company B but Company B is registered under Service Tax and hence is imposing service tax on company A at the time of presenting an Invoice.
Can Company A avail refund for this service tax ? OR
Is there any alternate solution to avoid service tax ?
Also, please note that Company A is only dealing with exports and has no local sales to avail credit.
24 June 2013
Company A should get Service tax and file claim of refund as it is exporter....contact..vikasmanglani@Gmail.com
Message likes :
1 times
24 June 2013
Company A should get service tax registeration and claim refund of service tax...vikasmanglani@Gmail.com
25 June 2013
Once Company A gets registered with Service Tax, can it get refund for the work outsourced from Company B ?
As, company A is purely an exporter and hence cannot pass on the service tax to the final user ?
As, company A is purely an exporter and hence cannot pass on the service tax to the final user ?
24 July 2025
You've asked a very important and practical question that was highly relevant under the pre-GST Service Tax regime, especially for companies involved exclusively in export of services (like IT/software development).
✅ Your Situation Recap:
Company A:
Provides export of software design services
Not registered under Service Tax (turnover < exemption limit)
Has no domestic output services (pure exporter)
Has outsourced work to Company B, which charges service tax
You’re asking:
Can Company A claim a refund of service tax paid to Company B?
Is there any alternate method to avoid paying service tax to Company B?
✅ Short Answer:
✔️ Yes, Company A can get a refund of input service tax paid — provided it registers under Service Tax and follows refund procedures applicable to exporters of services.
🔍 Legal Basis
1. Export of Services = Not Taxable
Under Rule 6A of the Service Tax Rules, 1994, export of services was not liable to service tax.
Since Company A is exporting services, it is considered a non-taxable output, similar to "zero-rated" under GST.
2. Refund of Input Services Tax for Exporters
Under Rule 5 of the CENVAT Credit Rules, 2004, exporters (even of services) could claim a refund of input service tax paid on services used for exports.
✅ Steps for Company A to Claim Refund:
Take Service Tax Registration (even if below threshold, since refunds require registration)
Collect and maintain input service invoices (e.g. from Company B)
Ensure the services are:
Used for export activity
Not used for exempt or personal purposes
File a refund claim under:
Notification No. 27/2012-CE (NT) dated 18.06.2012 (for refund under Rule 5)
File ST-3 returns and relevant declaration forms
⚠️ Important Notes:
Company B is right in charging service tax, because Company A is the service recipient.
However, since final output is export, the burden of input tax can be claimed back as refund.
Refund claim must be filed within one year from the date of export or payment (depending on case).
✅ Alternate Solution?
You asked about how to avoid paying service tax in the first place.
Here's the deal:
Option Is it possible? Comment
Ask Company B to not charge service tax ❌ Not possible legally Company B is providing taxable services, so it's required to charge service tax
Company A claims refund after registration ✅ Yes This is the correct approach
Use exemption without registration ❌ Not valid for claiming refund Refund is allowed only after service tax registration and filing of returns
📌 Summary:
✅ Company A should obtain Service Tax registration and claim refund of service tax paid on outsourced services used for export.
❌ There is no legal way to avoid being charged service tax by Company B unless Company A also falls under the small service provider exemption and Company B does not cross the threshold — but that’s not your situation.
✅ Your Situation Recap:
Company A:
Provides export of software design services
Not registered under Service Tax (turnover < exemption limit)
Has no domestic output services (pure exporter)
Has outsourced work to Company B, which charges service tax
You’re asking:
Can Company A claim a refund of service tax paid to Company B?
Is there any alternate method to avoid paying service tax to Company B?
✅ Short Answer:
✔️ Yes, Company A can get a refund of input service tax paid — provided it registers under Service Tax and follows refund procedures applicable to exporters of services.
🔍 Legal Basis
1. Export of Services = Not Taxable
Under Rule 6A of the Service Tax Rules, 1994, export of services was not liable to service tax.
Since Company A is exporting services, it is considered a non-taxable output, similar to "zero-rated" under GST.
2. Refund of Input Services Tax for Exporters
Under Rule 5 of the CENVAT Credit Rules, 2004, exporters (even of services) could claim a refund of input service tax paid on services used for exports.
✅ Steps for Company A to Claim Refund:
Take Service Tax Registration (even if below threshold, since refunds require registration)
Collect and maintain input service invoices (e.g. from Company B)
Ensure the services are:
Used for export activity
Not used for exempt or personal purposes
File a refund claim under:
Notification No. 27/2012-CE (NT) dated 18.06.2012 (for refund under Rule 5)
File ST-3 returns and relevant declaration forms
⚠️ Important Notes:
Company B is right in charging service tax, because Company A is the service recipient.
However, since final output is export, the burden of input tax can be claimed back as refund.
Refund claim must be filed within one year from the date of export or payment (depending on case).
✅ Alternate Solution?
You asked about how to avoid paying service tax in the first place.
Here's the deal:
Option Is it possible? Comment
Ask Company B to not charge service tax ❌ Not possible legally Company B is providing taxable services, so it's required to charge service tax
Company A claims refund after registration ✅ Yes This is the correct approach
Use exemption without registration ❌ Not valid for claiming refund Refund is allowed only after service tax registration and filing of returns
📌 Summary:
✅ Company A should obtain Service Tax registration and claim refund of service tax paid on outsourced services used for export.
❌ There is no legal way to avoid being charged service tax by Company B unless Company A also falls under the small service provider exemption and Company B does not cross the threshold — but that’s not your situation.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Notice from IT DEPTT IF FD AMOUNT EXCEEDS 10 LACS
- Applicablity on tds
- Unable to generate and save json file for updated return
- GST payable under RCM
- WRONGLY UPLOADED 10IF FOR COOPERATIVE SOCIETY
- Regarding TDS not deducted on rent
- Section 194I not showing in TDS RPU for Compnay Assessee for TDS on rent
- Which SAC code should be ed?
- Tax audit & Switching from Presumptive taxation
- LTCG offset against property buy
- How to update Transaction data in broker samco account holding after transfer shares KARVY
- 12AA registration
- Import purchase entry
- Rule 54(1A) for Distributing ITC
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Composition Dealer GST Annual Return Filing process
Trending Online Classes
-
LIVE Course on GSTR-9 & GSTR-9C (Technical | Practical | Concept - Based)
Sachin Jain03 November 2025
CAclubindia
