XYZ is a sole proprietorship firm or individual in India with its address in India.
XYZ is a consultant / advisor to FM a foreign manufacturer of capital equipments which does not have any office in India and is situated in a non-taxable country where FM's factory is also located.
As a consultant / advisor XYZ is required to perform the following services:-
Case (A)
- Inform and email inquiries to FM received from any company in India or of any tender published in the media for the type of equipments manufactured by FM.
- Advise FM in preparation of the offer.
- Advise FM in completing any techno-commercial queries that may arise.
- If required, advise FM in negotiating the order. As in all PSU tenders, where award of order to the lowest bidder is mandatory, no advice is required to be provided by XYZ to FM and hence in such cases XYZ is not acting as an intermediary or facilitator.
- Follow-up with the Indian client for order related matters so FM can successfully complete the contract and encash the L/C for its benefit.
- The order is placed directly on FM by the Indian customer and the payment is also secured directly to FM by L/C.
All the above services are performed and delivered by email or phone by XYZ to FM's office situated in a non-taxable country.
(B)
- Inform and email inquiries to FM received from any company in India or of any tender published in the media or obtain inquiries as a result of canvassing by emails, telephone calls and visits to users of such equipments manufactured by FM.
- Advise FM in preparation of the offer.
- Advise FM in completing any techno-commercial queries that may arise.
- If required, advise FM in negotiating the order. As in all PSU tenders, where award of order to the lowest bidder is mandatory, no advice is required to be provided by XYZ to FM and hence in such cases XYZ is not acting as an intermediary or facilitator.
- Follow-up with the Indian client for order related matters so FM can successfully complete the contract and encash the L/C for its benefit.
- The order is placed directly on FM by the Indian customer and the payment is also secured directly to FM by L/C.
All the above services are performed and delivered by email or phone by XYZ to FM's office situated in a non-taxable country.
In both cases, on successful completion of order and receipt of payment by FM, FM pays a pre-agreed amount to XYZ in convertible foreign exchange through normal banking channels.
In both cases, no after sales service or any other service is provided by XYZ in India on behalf of FM. XYZ does not have any infrastructure to provide any after sales service.
The above services may not be written in any agreement between XYZ and FM.
In communications XYZ maybe referred to as Advisor or Consultant or Agent by FM.
It appears that in Case (A) all the services are of advisory nature and are delivered outside India for which payment is received in convertible foreign exchange.
In Case (B) all the services are also of advisory nature and are delivered outside India for which payment is received in convertible foreign exchange. In case (B) only canvassing for business and follow-up in India are the additional services. The outcome of this canvassing and follow-up is also delivered to FM located outside India.
Q1. In Case (A) does XYZ fulfill all the requirements of 'Export Services' and is therefore, exempt from paying service tax?
Q2. In Case (B), will XYZ be considered as a facilitator or intermediary? If yes, is XYZ liable to pay service tax?
Q3. Are services provided in Case (B) of composite nature, i.e. 'Export Services' and 'canvassing and follow-up services in India, results of which are delivered outside India’? If yes, can the payment of service fees / charges by FM to XYZ be split into two parts, one for advisory services or 'Export Services' which is exempt from service tax and the other for services provided in India, which is liable to service tax?
Thank you for your time and attention.
Manick
XYZ is a sole proprietorship firm or individual in India with its address in India.
XYZ is a consultant / advisor to FM a foreign manufacturer of capital equipments which does not have any office in India and is situated in a non-taxable country where FM's factory is also located.
As a consultant / advisor XYZ is required to perform the following services:-
Case (A)
- Inform and email inquiries to FM received from any company in India or of any tender published in the media for the type of equipments manufactured by FM.
- Advise FM in preparation of the offer.
- Advise FM in completing any techno-commercial queries that may arise.
- If required, advise FM in negotiating the order. As in all PSU tenders, where award of order to the lowest bidder is mandatory, no advice is required to be provided by XYZ to FM and hence in such cases XYZ is not acting as an intermediary or facilitator.
- Follow-up with the Indian client for order related matters so FM can successfully complete the contract and encash the L/C for its benefit.
- The order is placed directly on FM by the Indian customer and the payment is also secured directly to FM by L/C.
All the above services are performed and delivered by email or phone by XYZ to FM's office situated in a non-taxable country.
(B)
- Inform and email inquiries to FM received from any company in India or of any tender published in the media or obtain inquiries as a result of canvassing by emails, telephone calls and visits to users of such equipments manufactured by FM.
- Advise FM in preparation of the offer.
- Advise FM in completing any techno-commercial queries that may arise.
- If required, advise FM in negotiating the order. As in all PSU tenders, where award of order to the lowest bidder is mandatory, no advice is required to be provided by XYZ to FM and hence in such cases XYZ is not acting as an intermediary or facilitator.
- Follow-up with the Indian client for order related matters so FM can successfully complete the contract and encash the L/C for its benefit.
- The order is placed directly on FM by the Indian customer and the payment is also secured directly to FM by L/C.
All the above services are performed and delivered by email or phone by XYZ to FM's office situated in a non-taxable country.
In both cases, on successful completion of order and receipt of payment by FM, FM pays a pre-agreed amount to XYZ in convertible foreign exchange through normal banking channels.
In both cases, no after sales service or any other service is provided by XYZ in India on behalf of FM. XYZ does not have any infrastructure to provide any after sales service.
The above services may not be written in any agreement between XYZ and FM.
In communications XYZ maybe referred to as Advisor or Consultant or Agent by FM.
It appears that in Case (A) all the services are of advisory nature and are delivered outside India for which payment is received in convertible foreign exchange.
In Case (B) all the services are also of advisory nature and are delivered outside India for which payment is received in convertible foreign exchange. In case (B) only canvassing for business and follow-up in India are the additional services. The outcome of this canvassing and follow-up is also delivered to FM located outside India.
Q1. In Case (A) does XYZ fulfill all the requirements of 'Export Services' and is therefore, exempt from paying service tax?
Q2. In Case (B), will XYZ be considered as a facilitator or intermediary? If yes, is XYZ liable to pay service tax?
Q3. Are services provided in Case (B) of composite nature, i.e. Advisory services delivered outside India as 'Export Services' and 'canvassing and follow-up services in India, and results of such canvassing are delivered outside India’? If yes, can the payment of service fees / charges by FM to XYZ be split into two parts, one for advisory services or 'Export Services' which is exempt from service tax and the other for services provided in India, which is liable to service tax?
Thank you for your time and attention.
Manick
CAclubindia
