Service to foreign manufacturer
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 May 2014
A foreign manufacturer (principal) sells goods in India to its customers (ultimate customer).
They have an agreement with an Indian company (agent) to provide marketing, commercial support, user training and after sales service to the customer on behalf of a foreign manufacturer.
The Indian Company is paid a commission in foreign exchange by the foreign manufacturer. No amount is received from the ultimate customers.
Further, the foreign manufacturer does not have any place of business in India.
Considering the Place of Provision of Service Rules 2012, will the service be outside the purview of service tax as the recipient of service (foreign manufacturer) is located outside India.
They have an agreement with an Indian company (agent) to provide marketing, commercial support, user training and after sales service to the customer on behalf of a foreign manufacturer.
The Indian Company is paid a commission in foreign exchange by the foreign manufacturer. No amount is received from the ultimate customers.
Further, the foreign manufacturer does not have any place of business in India.
Considering the Place of Provision of Service Rules 2012, will the service be outside the purview of service tax as the recipient of service (foreign manufacturer) is located outside India.
24 May 2014
You can refer case of Simpra Agency vs CCE Delhi by CESTAT bench in the year 2014. The facts of your case matches to them to an extent.
Querist : Anonymous
Querist :
Anonymous
(Querist)
28 May 2014
Thank you Mr. Deepak.
The case referred by you is indeed similar to the query raised by me.
However, it pertains to services rendered in 2010-11, i.e. before Place of Provision of Service Rules, 2012 were in force.
I wanted to know if there is any change in the status after applicability of Place of Provision of Service Rules.
The case referred by you is indeed similar to the query raised by me.
However, it pertains to services rendered in 2010-11, i.e. before Place of Provision of Service Rules, 2012 were in force.
I wanted to know if there is any change in the status after applicability of Place of Provision of Service Rules.
25 July 2025
Great question — let’s break it down in the context of **Place of Provision of Services Rules, 2012 (PoPS)** and **export of service** principles under the **Service Tax regime (pre-GST)**.
---
### ✅ **Scenario Recap:**
* You (Indian company) provide **marketing, training, and after-sales support** for a **foreign manufacturer**.
* You receive **commission in convertible foreign exchange**.
* The foreign manufacturer **does not have a place of business in India**.
* **No payment is received from Indian customers**; your only client is the foreign principal.
---
### 🔍 **Is this service taxable under Service Tax?**
Let’s test it using the **5 conditions for “Export of Service”** under **Rule 6A of the Service Tax Rules, 1994**:
#### **1. The provider of service is in India:** ✅ Yes
#### **2. The recipient is located outside India:** ✅ Yes
#### **3. The service is not specified under the negative list or otherwise exempted:** ✅ Yes (This is a taxable service but not negative listed)
#### **4. The place of provision of service is outside India (per PoPS Rules):** ✅ Yes
* As per **Rule 3 of PoPS**, the place of provision is **the location of the service recipient**, i.e. **outside India**.
* Even though services are performed in India (marketing, training etc.), the key is **who is the recipient** — and in your case, it's the **foreign manufacturer**.
#### **5. Payment is received in convertible foreign exchange:** ✅ Yes
✅ **Conclusion**: **All five export conditions are satisfied.**
---
### 🧾 **Therefore:**
* Your service qualifies as an **export of service**.
* **Export of service is not chargeable to service tax** under Rule 6A of the Service Tax Rules.
* You should **file for refund or claim rebate** (if CENVAT is involved), and report it as **export of service (exempt)** in your **ST-3 return**.
---
### ⚠️ Additional Considerations:
* **File LUT or Bond** if you're availing input credit and not paying tax upfront.
* Maintain proper documentation (contract, invoices, FIRC, agreement with foreign principal).
* Make sure that **foreign principal has no establishment or fixed place of business in India**, or else taxability may shift.
---
### ✅ Final Verdict:
Your services to the **foreign manufacturer** qualify as **export of service** and are **outside the purview of service tax**, subject to fulfillment of above conditions under the **Place of Provision of Services Rules, 2012**.
Let me know if you want a draft of a letter or certificate format for claiming export treatment or responding to tax queries.
---
### ✅ **Scenario Recap:**
* You (Indian company) provide **marketing, training, and after-sales support** for a **foreign manufacturer**.
* You receive **commission in convertible foreign exchange**.
* The foreign manufacturer **does not have a place of business in India**.
* **No payment is received from Indian customers**; your only client is the foreign principal.
---
### 🔍 **Is this service taxable under Service Tax?**
Let’s test it using the **5 conditions for “Export of Service”** under **Rule 6A of the Service Tax Rules, 1994**:
#### **1. The provider of service is in India:** ✅ Yes
#### **2. The recipient is located outside India:** ✅ Yes
#### **3. The service is not specified under the negative list or otherwise exempted:** ✅ Yes (This is a taxable service but not negative listed)
#### **4. The place of provision of service is outside India (per PoPS Rules):** ✅ Yes
* As per **Rule 3 of PoPS**, the place of provision is **the location of the service recipient**, i.e. **outside India**.
* Even though services are performed in India (marketing, training etc.), the key is **who is the recipient** — and in your case, it's the **foreign manufacturer**.
#### **5. Payment is received in convertible foreign exchange:** ✅ Yes
✅ **Conclusion**: **All five export conditions are satisfied.**
---
### 🧾 **Therefore:**
* Your service qualifies as an **export of service**.
* **Export of service is not chargeable to service tax** under Rule 6A of the Service Tax Rules.
* You should **file for refund or claim rebate** (if CENVAT is involved), and report it as **export of service (exempt)** in your **ST-3 return**.
---
### ⚠️ Additional Considerations:
* **File LUT or Bond** if you're availing input credit and not paying tax upfront.
* Maintain proper documentation (contract, invoices, FIRC, agreement with foreign principal).
* Make sure that **foreign principal has no establishment or fixed place of business in India**, or else taxability may shift.
---
### ✅ Final Verdict:
Your services to the **foreign manufacturer** qualify as **export of service** and are **outside the purview of service tax**, subject to fulfillment of above conditions under the **Place of Provision of Services Rules, 2012**.
Let me know if you want a draft of a letter or certificate format for claiming export treatment or responding to tax queries.
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