Taxability
This query is : Resolved
16 June 2014
Respected Sirs,
The service provider(SP) is an Individual freelancer situated in Delhi. Enters into a contract with foreign entity(FE)for feasibility study of a project situated abroad. Whether receipts of SP chargeable to service tax.
What if the FE has a PE in india.
What if the project is in India
What if project in India And FE has PE in India
The SP need not travel anywhere for the above purpose.
The service provider(SP) is an Individual freelancer situated in Delhi. Enters into a contract with foreign entity(FE)for feasibility study of a project situated abroad. Whether receipts of SP chargeable to service tax.
What if the FE has a PE in india.
What if the project is in India
What if project in India And FE has PE in India
The SP need not travel anywhere for the above purpose.
16 June 2014
he charge to service tax from foreign company on his fee. it is no effect if FE have any PE or not.
16 June 2014
he charge to service tax from foreign company on his fee. it is no effect if FE have any PE or not.
16 June 2014
As per my view service tax shall not be charged by the freenlancer on the fees:
Reason sfor my reply:
As per Export of services rules (Rule 6A of service tax Rules)
1.The service provider should be located in taxable territory-In your casethe freelancer is in Delhi,a txable territory
2.The service receiver should be located outside India-In yourcase the FE is located outside India
3.The service is not a Exempted Service
4.The Place of provision of service is outside India-In your case the general rule that is the location of service receiver shall be place of provison SHALL APPLY .Therefore as the place of provision is outside India,service tax shall not be charged.Even if he has a PE in India that doenot not been its place of provision is India.
Please note that the service provided by the freelance is not a performance based service as neither it is performed in respect of any goods that were required to be physically present in India neither the service are provided to an individual whose physical presence is required in India
5.The payment is received in Convertible Foreign Exchange-In your case we assume that receipt shall be in CFE
6.The service provider and receiver are not merely establishments of a distinct person as per Section 65b Clause 44 Explanation 2(b)-In your case the service provider and the service receiver are not part of the same group and are not linked to each other.Therefore even the last conditionis satisfied for exports.
I would request other experts to put in there valuable opinions.
Reason sfor my reply:
As per Export of services rules (Rule 6A of service tax Rules)
1.The service provider should be located in taxable territory-In your casethe freelancer is in Delhi,a txable territory
2.The service receiver should be located outside India-In yourcase the FE is located outside India
3.The service is not a Exempted Service
4.The Place of provision of service is outside India-In your case the general rule that is the location of service receiver shall be place of provison SHALL APPLY .Therefore as the place of provision is outside India,service tax shall not be charged.Even if he has a PE in India that doenot not been its place of provision is India.
Please note that the service provided by the freelance is not a performance based service as neither it is performed in respect of any goods that were required to be physically present in India neither the service are provided to an individual whose physical presence is required in India
5.The payment is received in Convertible Foreign Exchange-In your case we assume that receipt shall be in CFE
6.The service provider and receiver are not merely establishments of a distinct person as per Section 65b Clause 44 Explanation 2(b)-In your case the service provider and the service receiver are not part of the same group and are not linked to each other.Therefore even the last conditionis satisfied for exports.
I would request other experts to put in there valuable opinions.
26 July 2025
Sure! Here’s a detailed take on the **service tax treatment** for the scenario you shared regarding the freelancer (service provider) in India providing feasibility study services to a foreign entity (FE):
---
### Key Points from Service Tax & Export of Services Rules:
1. **Service Provider Location:**
* Freelancer is in Delhi (taxable territory in India).
2. **Service Receiver Location:**
* Foreign Entity (FE) located outside India.
3. **Nature of Service:**
* Feasibility study for a project situated abroad.
4. **Place of Provision of Service (POP):**
* As per general rule, the POP is where the **service receiver** is located (Section 66A of Finance Act + Rule 9 of Place of Provision Rules).
* Here, POP = Outside India.
5. **Payment in Convertible Foreign Exchange (CFE):**
* If the payment is received in CFE, this supports the service being treated as **export of service**.
6. **Exemptions and Conditions for Export of Service (Rule 6A):**
* Service provider in India (✓)
* Service receiver outside India (✓)
* Service is not exempted (usually feasibility study is not exempt)
* Place of provision outside India (✓)
* Payment received in CFE (assumed ✓)
* Service provider and receiver not related entities (✓)
---
### **Summary of Taxability:**
| Scenario | Is Service Tax Applicable? | Reasoning |
| ------------------------------------------------------------ | -------------------------- | ---------------------------------------------------------------------------------------------------------------- |
| FE located outside India, project abroad, SP doesn’t travel | **No** | Service is treated as export of service, place of provision outside India, exempt from service tax |
| FE has Permanent Establishment (PE) in India, project abroad | **No** | PE status does not affect place of provision or export status; still export service |
| Project located in India, FE outside India | **Yes** | POP will be in India because service relates to immovable property/project located in India; service tax applies |
| Project in India, FE has PE in India | **Yes** | Same as above, service tax applicable as POP is India |
---
### **Additional Notes:**
* If the project relates to **immovable property situated in India**, the place of provision will be India regardless of where the FE is located.
* Service tax liability arises if the POP is India, even if the FE is foreign.
* PE status of FE does not change the place of provision for general services.
* Freelancer must invoice with service tax if service tax is applicable.
* If service tax is applicable, the freelancer must register for service tax and pay accordingly.
---
### **Conclusion:**
* **No service tax if:** Project outside India and FE outside India, payment in convertible foreign exchange, conditions of export of service met.
* **Service tax applicable if:** Project located in India or service related to immovable property in India.
---
If you want, I can also help draft a sample invoice or check if GST applies (depending on the year and jurisdiction). Need that?
---
### Key Points from Service Tax & Export of Services Rules:
1. **Service Provider Location:**
* Freelancer is in Delhi (taxable territory in India).
2. **Service Receiver Location:**
* Foreign Entity (FE) located outside India.
3. **Nature of Service:**
* Feasibility study for a project situated abroad.
4. **Place of Provision of Service (POP):**
* As per general rule, the POP is where the **service receiver** is located (Section 66A of Finance Act + Rule 9 of Place of Provision Rules).
* Here, POP = Outside India.
5. **Payment in Convertible Foreign Exchange (CFE):**
* If the payment is received in CFE, this supports the service being treated as **export of service**.
6. **Exemptions and Conditions for Export of Service (Rule 6A):**
* Service provider in India (✓)
* Service receiver outside India (✓)
* Service is not exempted (usually feasibility study is not exempt)
* Place of provision outside India (✓)
* Payment received in CFE (assumed ✓)
* Service provider and receiver not related entities (✓)
---
### **Summary of Taxability:**
| Scenario | Is Service Tax Applicable? | Reasoning |
| ------------------------------------------------------------ | -------------------------- | ---------------------------------------------------------------------------------------------------------------- |
| FE located outside India, project abroad, SP doesn’t travel | **No** | Service is treated as export of service, place of provision outside India, exempt from service tax |
| FE has Permanent Establishment (PE) in India, project abroad | **No** | PE status does not affect place of provision or export status; still export service |
| Project located in India, FE outside India | **Yes** | POP will be in India because service relates to immovable property/project located in India; service tax applies |
| Project in India, FE has PE in India | **Yes** | Same as above, service tax applicable as POP is India |
---
### **Additional Notes:**
* If the project relates to **immovable property situated in India**, the place of provision will be India regardless of where the FE is located.
* Service tax liability arises if the POP is India, even if the FE is foreign.
* PE status of FE does not change the place of provision for general services.
* Freelancer must invoice with service tax if service tax is applicable.
* If service tax is applicable, the freelancer must register for service tax and pay accordingly.
---
### **Conclusion:**
* **No service tax if:** Project outside India and FE outside India, payment in convertible foreign exchange, conditions of export of service met.
* **Service tax applicable if:** Project located in India or service related to immovable property in India.
---
If you want, I can also help draft a sample invoice or check if GST applies (depending on the year and jurisdiction). Need that?
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