Permits fees,licence fees etc

Licence fee and permit fee will  form part of value if the same has nexus with the principal service provided. This rule is applicable to import of service as well as export of services, Export of service is exempted from service tax subject to conditions. For this services are groupedin  to three, for each group diffreent conditions apply. For. eg. if service relates to immovable property, the immovable property shall be situated outside India. For the other group , situs of recepient of service is the test. For the third group situs of performance of service is the test. For all group receipt of consideration in FE is must. 

Reimbursement of expense in ecess of actual will disqualify the pure agent.

Please refer to Service Tax (Determination of Value) Rules, 2006. Explanation1 to Rule 5 of the said rules provide that:– “For the purposes of sub- rule (2), “pure agent” means a person who–

(a)     enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing  taxable service;

(b)     neither intends to hold  nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;

(c)     does not  use  such goods or services so procured; and

(d)     receives only the actual amount incurred to procure such goods or services.”

Hence where an agent charges any amount in excess of amount actually paid by him for procurement of the goods concerned, he cannot be treated as pure agent as per the above explanation. Therefore air ticket agent in your case is only an agent who is required to pay Service Tax on gross amount charged from the service recipient subject to other provisions, viz., Rule 6 of the above mentioned Rules which is produced here:

“6. Cases in which the commission, costs, etc., will be included or excluded.–

(2) Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include–

(ii)       the airfare collected by air travel agent in respect of service provided by him;”

Therefore the air ticket agent will be required to pay tax on (Rs.1000) gross amount charged by him from the customer (Rs.11000) reduced by the actual airfare (Rs.10000).

License fee, Permit fee etc. Will certainly be considered while the value of taxable service is to be determined if there is a nexus between such expense and the service provided. Inclusion or exclusion from the value of service are common for almost all services. But as per rule 4 of Export of Service Rules, 2005 any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax provided it comes under the definition of Export of service as provided in the said rules. Rule 3 of Export of Service Rules classifies the taxable services in three categories:

(a)   Immovable property is situated abroad

(b)   Service performed outside India and

(c)   Recipient is located outside India.

 Immovable property situated abroad -The service will be treated as ‘export of taxable service’ and would be eligible for exemption only when following conditions are satisfied:

(a)   the immovable property is situated abroad,

(b)   the service is delivered outside India and used in business or for any other purpose outside India and

(c)   Payment for such service is received in convertible i.e. free foreign exchange

Services performed outside India – The service will be treated as ‘export of service’ if following conditions are satisfied:

(a)   It should be at least partly performed outside India.

(b)   The service is delivered outside India and used in business or for any other purpose outside India and

(c)   Payment for such service is received in convertible i.e. free foreign exchange

Service provided from India, but recipient of service outside India: Remaining services, which fall in third i.e. residual category, will be treated as ‘export of service’ if recipient is located abroad. These can be treated as ‘export of service’, even if the service is provided from India. In case of services falling under third category, there are certain conditions and restrictions if the recipient has a commercial or industrial establishment or any office relating thereto, in India

Hope this gives a clear picture about the provisions of Export of services.