Service tax leviable or not?

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KUNAL BAJAJ (Querist)
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01 December 2015 My Company in India provides manpower service to a company located in Singapore. Manpower sits in India and work for Singapore Company. Salaries and other expenses are paid by Indian Company. Indian Company Charges Fee for such service from Singapore Company. e.g Invoice Amount (10.80 Lacs)= Salaries (10 Lacs) + 8% on 10 Lacs(Services Charges) Directors are Common in both entities. My Query is : Whether Service Tax Leviable or It is exempt as per Rule 3, POPS, 2012 or it is export?

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Ashish Chaudhary

Ashish Chaudhary (Expert)
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02 December 2015 Yes, the services would be export of service under Rule 3 of POPS as the contractual obligation to receive the services and payment of consideration is on the foreign company. The location of employee is not relevant.

KUNAL BAJAJ

KUNAL BAJAJ (Querist)
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02 December 2015 but sir, what if directors are common in both companies, Rule 6A would be N.A?

KUNAL BAJAJ

KUNAL BAJAJ (Querist)
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02 December 2015 but sir, what if directors are common in both companies, Rule 6A would be N.A?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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24 July 2025 Great question! Let's break it down carefully:

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### Situation Summary:

* Indian company provides **manpower services** to a Singapore company.
* The manpower **works physically in India**.
* Indian company pays salaries and expenses, charges service fee (including 8% service charges on salaries).
* Directors are common to both companies.
* Query: Is this service taxable under service tax or exempt/export under Rule 3 of Place of Provision of Services (POPS), 2012? And does Rule 6A impact this because directors are common?

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### Relevant Provisions:

#### 1. **Export of Services under Service Tax:**

* As per **Rule 3 of POPS, 2012**, the place of provision of service is where the **recipient of service** is located (Singapore).
* The essential conditions for **export of service** are:

* Supplier of service is located in India.
* Recipient is located outside India.
* Service is used outside India.
* Payment is received in convertible foreign exchange or in Indian rupees wherever permitted by RBI.

Since the recipient is in Singapore and payment is received from there, the service is considered **export of service** and thus **zero-rated** (exempt from service tax but eligible for input credit).

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#### 2. **Rule 6A of POPS (Specified Persons):**

* Rule 6A states that if the supplier and recipient are **related persons** or have **common control/management**, the place of provision of service shall be the location of the supplier (India), even if the recipient is outside India.
* Directors being common can mean **common control/management**.
* So if Rule 6A applies, the place of provision will be India, meaning the service will be **taxable in India** (service tax leviable).

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### What does this mean for your case?

* If the companies are **related** due to common directors and can be shown to have common control/management, **Rule 6A will override Rule 3**.
* Hence, the place of provision will be India and service tax **will be leviable** on the fees charged.
* If the companies are **independent and unrelated**, Rule 3 applies and service qualifies as **export of service (zero-rated)**.

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### Practical Tips:

* Assess the nature of relationship between companies carefully.
* If common directors translate to "related persons" or common control, service tax applies.
* If no such relationship/control, consider service as export.
* Maintain documentation clearly stating relationship and agreements.
* Consult a professional for detailed review of ownership/control.

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If you want, I can help draft a detailed analysis or formal opinion based on your company's structure. Would you like that?

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