Hi Experts,
I need clarification on a service tax issue.
The company, I work for, is completely exempt from service tax. It is a software company. I am planning to work as a consultant for them. I would be paid in INR and the amount would surely cross 10 lacks per annum. Would I be liable to pay service tax? I am advised that I would be liable. Isn't this regressive in nature? A contractor is exempted but sub-contractor is not.
I need opinion from experts here on caclubindia.
Regards,
Chandan
Hi Chandan,
I guess company you are referring is in SEZ zone, so you need to collect from A2 from them & no need to charge ST on your Invoices.
Pl refer: https://www.servicetax.gov.in/notifications/notfns-2013/st12-2013.htm
Thanks
Thanks for the reply, Vaibhav.
I am sure it is not in SEZ.
It used to be an EOU till 31st Mar 2011.
As per the CA, now they are exempt as per export of service rule. All their clients are outside India.
Does this info help you to analyze my case differently? Please note, I am trying to get on board as a sub-contractor and would be servicing their clients.
Regards,
Chandan
Hi
If they are EOU then you will be requitred to charge ST, you can avail 10 lacs SSI exemption.
Thanks
If you take Salary from the company, then there is no service tax on employer/employee. But you are providing professional services as a Consultant to the company located in India, then the place of provision is in the taxable territory and you are liable to pay service tax.
Unlike Works Contract Service, where if the main contractor is exempted, then the sub-contractor is also exempted, there is no exemption provided for services provided by you.
Thanks Manoj and Vaibhav.
I have decided not to pursue this opportunity.
I will continue as an employee.
It is difficult for me to understand if service is being exported how can anyone in the 'provider chain' be taxed for service. I will leave it to you guys to ponder over.
Regards,
Chandan
Hi Vaibhav / Manoj,
What is the meaning of following in the context of my previous query? Won't I be exempted if the company I work for is exempted from paying service tax? Please note, I would be executing a contract with them if I choose to be a sub-contractor.
...
Services by following intermediaries are exempt from service tax:
....
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H. sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt
...
(Ref: https://www.servicetax.gov.in/st-edu-guide.pdf)
Regards,
Chandan
PS : Other experts are welcome to answer too. I directed this to Vaibhav and Manoj as they answered my previous query.
Kinldy refer to the 2nd paragraph of my reply where i have already answered your query. Note that just by signing a contract with the company, it doen't become 'Works Contract' which is specifically defined u/s 65B(54) of the Finance Act, 1994. You are providing consultancy service and not works contract.
Got it.
Thanks.
Can you please let me know if the following notification is still valid? I have pasted relevant section underneath.
https://www.servicetax.gov.in/circular/st_circ_56-2k3.htm
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4. Another question raised is about the taxability of secondary services which are used by the primary service provider for the export of services, Since the secondary services ultimately gets consumed/merged with the services that are being exported no service tax would be leviable on such secondary services. However in case where the secondary service gets consumed in part or toto for providing service in India, the service tax would be leviable on the secondary service provider. For this purpose both primary and secondary service providers would maintain the records deemed fit by them to identify the secondary services with services that are being exported.
....
If the above is not valid anymore, is there anything equivalent?
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