Service tax on animation services to foreign clients.

Jayesh Rathor (Student) (55 Points)
Replied 26 February 2016

I think you are eligible to pay service tax as per Reverse Charge Mechanism wherein service provider that is you will be liable to pay ST to Central Government on behalf of your foreign clients Correct me if I am wrong

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 27 February 2016

Dear Mr. Dinesh,

You are providing services to client who are outside the taxable territory (outside India), Hence you are not liable to pay service tax as this is considered as export of services (refer below).

RULE [6A. Export of services. —(1) The provision of any service provided or agreed to be provided shall be treated as export of service when,

(a) the provider of service(You) is located in the taxable territory (India),

(b) the recipient of service(Foreign Clients) is located outside India,

(c) the service is not a service specified in the section 66D of the Act,

(d) the place of provision of the service is outside India, (as foreign client is outside India, POP is outside India)

(e) the payment for such service has been received by the provider of service in convertible foreign exchange (as you said you are receiving in Dollars), and

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 27 February 2016

Dear Jayesh,

Sorry to say this, your understanding is not correct.

Reverse charge is applicable on spectified category of services in 30/2012 ST dated 20.06.2012, in above case you referred the case as import of service, Where if any business entity is receiving service from non-taxable territory, then it is treated as import of service and place of provision is location of service receiver (Rule 3 of POPS Rule).

But this case is export of service.

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 27 February 2016

Dear Jayesh,

Sorry to say this, your understanding is not correct.

Reverse charge is applicable on spectified category of services in 30/2012 ST dated 20.06.2012, in above case you referred the case as import of service, Where if any business entity is receiving service from non-taxable territory, then it is treated as import of service and place of provision is location of service receiver (Rule 3 of POPS Rule).

But this case is export of service.

dinesh sehgal (9 Points)
Replied 27 February 2016

Dear Prakash,

Thanks for the reply.. As you mentined the Place of provision in my case is outside India, but in reality I am working in india only, I am just sending my final outcome or final files on emails and through other web services to my client.. So is it still considered as export of services ??

And if yes, then can I get back the money which I have already paid to the government in the form of ST? Pls help.. Thanks!

dinesh sehgal (9 Points)
Replied 27 February 2016

Dear Prakash,

Thanks for the reply.. As you mentined the Place of provision in my case is outside India, but in reality I am working in india only, I am just sending my final outcome or final files on emails and through other web services to my client.. So is it still considered as export of services ??

And if yes, then can I get back the money which I have already paid to the government in the form of ST? Pls help.. Thanks!

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 27 February 2016

As per Rule 9 of place of provision rules, location of service provider is POP for (b)Online information and database access or retrieval services

Rule 2(l) defines ‘online information & database access/retrieval services’ to mean providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network e.g. web based services like matrimony services, social networking sites, online subscripttion of newspapers, weather reports, etc.

Following are not covered:

1. Sale/purchase of goods etc. over the internet

2. Telecommunication services provided over the internet including fax, audio conferencing, video conferencing and telephony

"3. A service which is rendered over the internet, such as architectural drawing or management consultancy through email"

4. Repair of software, or of hardware, through the internet, from a remote location

Your service may cover under excluding category. If so, then you will covered under Rule 3 I.e location of service receiver is POP. So export of service.

Pls read the definition given above and confirm whether your facts will fit under this or not.

I request you kindly share complete facts when you are asking any queries.

dinesh sehgal (9 Points)
Replied 27 February 2016

To be specific here is what I do :

For example, Mr. A is making a film in USA, he needs some animation to be added in his film. He will then send all the clips or footage to my company (over Internet) and we (who are sitting in India) will recieve the clips or footage, will add the animation on it in our studio and send back all the clips and footage to our the client through internet only.. Please note that in this whole process neither me or anyone from my team is going to is visiting USA.

So is this considered as the export of service ?

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 27 February 2016

Correct me if I'm wrong, you are receiving clips and putting it into animated software's like CAD, CAM etc to do animation as required by client.

Hope your not changing any content or adding any content Except animation.

If this is the case, then I can say that your service would not fit under Rule 9 and it comes under Rule 3 where PoPs is location of receiver. Hence export of service.

Please note there is thin line gap to determine whether it is Export of service or not.

dinesh sehgal (9 Points)
Replied 27 February 2016

Yes, thats correct !

So now my next concern is, can I get back the money which I have already paid to the govt in the form of Service Tax? I did this type of service in the year 2013-14 and I recieved the payment in 2014-15 and I paid the ST in the same year ..