Service tax on information technology service
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 April 2016
One of my client, a private limited company is a BPO/KPO Service provider. They undertake jobs from another Indian Company, say X. The directly access the servers located outside India and complete the jobs. The bill to X company and that company bill to foreign clients. Now whether the service provided by my client can be considered as export of service?
Suresh Ramaswamy
(Expert)
24 April 2016
To comprise "Export of Service" three conditions should be fulfilled - all three.
(a) The Service should be rendered to an entity not resident in taxable territory. The non resident should not have any branch, office, liasion officer or representative in taxable territories.
(b) The service should be rendered abroad.
(c) The consideration should be received in convertible foreign exchange through proper channels.
In your case even though the service is directly rendered overseas, the other two conditions are not fulfilled. Neither is the billing done to an entity who is non-resident nor is the consideration received in convertible foreign exchange.
Therefore the services rendered by your client to X Ltd. is not 'Export of Service' as per the Rules.
(a) The Service should be rendered to an entity not resident in taxable territory. The non resident should not have any branch, office, liasion officer or representative in taxable territories.
(b) The service should be rendered abroad.
(c) The consideration should be received in convertible foreign exchange through proper channels.
In your case even though the service is directly rendered overseas, the other two conditions are not fulfilled. Neither is the billing done to an entity who is non-resident nor is the consideration received in convertible foreign exchange.
Therefore the services rendered by your client to X Ltd. is not 'Export of Service' as per the Rules.
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CA R SEETHARAMAN
(Expert)
25 April 2016
Mr Suresh Ramasamy do you agree with my view that export of service rules is replaced with POP Rules. As per POP Rules the service is provided to a foreign client and service tax not applicable.
Suresh Ramaswamy
(Expert)
25 April 2016
Agreed but in this case the service is provided to an Indian client and not to a foreign client. There is no relationship whatsoever between the foreign client and the service provider, except access the foreign client's records. No privity of contract exists - and hence how can POP Rules be applied in this case. Would be glad for clarifications on this matter Mr.Seetharaman.
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CA R SEETHARAMAN
(Expert)
25 April 2016
If you agree with me that service receiver as per POP Rules here is out side India, no service tax payable. This view is also possible here.
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