Import of Service

Nothing is your responsibility, they will charge as per srilanka rules and regulation.

Yes you will be liable to pay service tax under reverse charge Mechanism. The rules classify all taxable services in three categories, namely (i) Services in relation to immovable property (ii) Services to be performed in India and (iii) Services received by recipient located in India. The classification is same as per export of Service Rules. Who is liable for Service tax? As per Rule 2(1)(d)(iv) of Service tax Rules (amended w.e.f. 19-4-2006), person liable for paying the service tax means - in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service. Para 4.2 of MF (DR) circular No. 81/4/2006-TRU dated 19-4-2006 states as follows, ‘Internationally, services provided by a foreign supplier to a domestic customer are subjected to VAT/GST under reverse charge or tax shift mechanism. Under the reverse charge method, a legal fiction is created treating as if the recipient had himself provided the services domestically and accordingly, the recipient of services is treated as deemed service provider’.

The critical question is whether the sale and installtion of the software is in a situation where the source code , power to make changes is provided to your client. IF so then the sale of s/w by the Srolankan entity is not liable for ST.

However the installation charges wouldbe liable on reverse charge basis.

 

If only a license is provided then the same could be under ITSS and wouldbe liable under reverse charge.