Service tax for services provided through a foreign company

Queries 5706 views 3 replies

Vijayakumar Kudur

Principal Consultant

25 Points Joined March 2013

I am engaged by a US based firm on contract basis to provide training service in India & outside India also. The US based firm interacts with the customers in India & they sell the training services to them. as part of the sales, the US based firm makes it clear to customer that they (customers) will have to pay the service tax applicable in India. So the service tax is paid by the customers. I have checked with few customers & they have confirmed the same.

In this scenario, as service tax is already paid by the recipient of the service & I am working with a foreign company who does not have any office in India, do I still need to pay the service tax for the trainings I provide in India? Also can this be considered as export of service as I will be dealing with the foreign company directly & the money gets credited in USD to my account directly from US.

If I do not need to pay service tax, is there any thing that I need to declare for claiming the exemption?

Any response to this will be greatly appreciated

Replies (3)

CA RAHUL PATEL

PARTNER

57 Points Joined November 2010

It depends upon what kind of training servicea are performed. If it involves training to individuals requiring physical presence in proximity to trainer then rule 4 shall be applicable and accordingly sertax shall be applicable if training is given in India. If not so rule 3 would apply and accordingly place of provision would be outside India and hence no sertax would be payable by u.

KCJM and Associates

Chartered Accountants Firm

864 Points Joined October 2012

As per Rule 3 of Place of Provision of Service Rules, 2012, the place of provision of a service shall be the location of recipient of service. Further, Rule 2(i) of Place of Provision of Service Rules, 2012 defines the location of service receiver as the location:

where the recipient of service has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained
where the recipient of service is not covered under sub-clause (a):

i. the location of his business establishment; or

ii.where services are used at a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or

iii.where services are used at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service; and

iv.in the absence of such places, the usual place of residence of the recipient of service.

Therefore, in the present case, if you are providing services in India ie the recipient is in India, then the Place of Provision of Service shall be in taxable territory and so service tax shall be leviable on such amount of services.

Secondly, if you are providing services outside India i.e. the recipient is outside India, then the Place of Provision of Service shall be outside the taxable territory and further as you are receiving consideration in convertible foreign currency, the same can be considered as export of service on which service tax is not leviable.

If your turnover (Domestic and Export) exceeds the prescribed limit than, you need to file service tax return in which you can show your export turnover and claim exemption for the same.

Vijayakumar Kudur

Principal Consultant

25 Points Joined March 2013

Thanks for the response.

I agree that since the service is being provided in India, service is tax is payable.

However, in this case, the reciepient of the service has already paid the service tax & then paid the fees to the US company. US company has enaged me to provide the services on behalf of them. My question is, as the recipient has already paid the service tax, do i still need to pay the service tax again? Is it not double taxation?