Our Company need to pay Marketing Charges for EXPORT to foreign service provider (Busniess Auxillary service); Shall we claim exemption for 1% on FOB value of Export Bill from Service Tax payable on marketing/promotion charges to foreign service provider? kindly advice..
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Service tax on business auxillary service
Replies (1)
The exemption of 1% of FOB Value applies to the commission agent, as per Notification No. 42/2012 - ST dated 20.06.2012. The notification states that Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.
Hence, the exemption as specified by you will be available only if the foreign party is a commission agent.
However, as per Rule 9 of the Place of provision of services Rules, 2012, (Enclosed below), the place of provision of intermediary services, is location of service provider, which, in your case is outside Taxable territory. Prior to 1.10.2014, intermediary for services alone was covered. However, w.e.f. 1.10.2014, agent for sale or purchase of goods is also covered under intermediary definition.
| f) | "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account; ] |
Hence, if the service falls under "intermediary services", then by virtue of Rule 9 as above, the service is not taxable in India, as it is provided outside Taxable territory.
Please revert in case of any clarification.
Place of provision of specified services .
9 . The place of provision of following services shall be the location of the service provider:—
| (a) | Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; | |
| (b) | Online information and database access or retrieval services; | |
| (c) | Intermediary services; | |
| 1 [ (d) | Service consisting of hiring of all means of transport other than,— |
| (i) | aircrafts, and | |
| (ii) | vessels except yachts, |
| upto a period of one month. ] |
1. Clause (d) substituted by the Place of Provision of Services (Amendment) Rules, 2014, w.e.f. 1-10-2014. Prior to its substitution, said clause read as under :
"(d) Service consisting of hiring of means of transport, upto a period of one month."
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