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Service tax for foreign companies to do business in india

Rahul Mer (Self Employed ) (30 Points)

07 October 2015

Dear All,

Greetings....!!!!

I have my company (Pvt Ltd) in India, and doing business with Hong Kong Company from last 2 years, we dont go and give services directly in Hong Kong, we work in India and create applications for them, our delivery mode is always online.

All our financial transcations are done directly to My company bank account, and the yearly transcations are going more then Rs 1 000 000 INR, can you please help me understand if i am libel to pay 14% service tax for the amount i receive every month?

Thanks in Advance....

Regards

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7 Replies

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 07 October 2015

As place of provision of service is beyond taxable territory,S.T is not payable.

RAHULSMITTAL (Partner, V Mittal & Co) (252 Points)
Replied 07 October 2015

The provision of service is in INDIA. The billing is from India. Liable for service tax.

Rahul Mer (Self Employed ) (30 Points)
Replied 07 October 2015

Thanks Prabhat for your reply. But can you please explain as my CA suggested that the S.T. is payable. And if I don't then there could be chance of paying penalty. Regards Rahul

Rama Krishna (Dy.Manager Finance) (38 Points)
Replied 07 October 2015

As per place of provision of service rules, Service tax is payable in your case. Better comply in earliest possible time to avoid penalty, but late payment interest is payable if u r already late.regards ramakrishna

Amit Bhattad (Employee) (35 Points)
Replied 07 October 2015

Hallo Rahul Place of provision of service beyond taxable territory. I agree with Mr. Prabhat. Service Tax not payable. This is export service. You can claim also cenvat refund under rule 5.

Rahul Mer (Self Employed ) (30 Points)
Replied 08 October 2015

Thankyou Amit, one last question... The amount we receive is not in $, They have given the instructions to there bank, to transfer the amount in INR, and it reflect like the below format.. NEFT-[clients bank account]-[clients company name] Will that make any difference, or I should ask them to transfer into $. Thnx in advance.

mitul (practice) (26 Points)
Replied 08 October 2015

As per the place of provision rules the most important factor is that the services provider located in India and recipients of service (service receivers) if located out side India then it's export service provided that the whole amount received in convertible foreign exchange. In your case you received ion rupees so not qualify for export service and hance you need to pay service tax on the amont received.