Service tax on export of services

export of services is exempted from tax levy

Thanks to Pooja and Sakshi.

On the same lines, I have one more query. I also sometimes offer software developments and such computer related services to foreign customers - where again the money is received into my Indian bank  account ((in foreign currency - converted to INR by the bank) through a payment gateway. 

Do these remittances also qualify as export of services and hence exempt from service tax levy?

Thank you again for your guidance.

yes,its exempted

Yes the aforesaid services are exempt from payment of service tax provided you receive consideration in Foreign Currency and you receive such foreign currency in India within the time period prescribed by RBI under FEMA,1999 i.e 1 year !!

- Ruben Balooni

Thank you Pooja and Ruben. Its been very assuring.

If I may bother you some more - is there a specific official notation or write up within the Service Tax manual or rules that categorically confirm this exemption? Also, will this exception be available even when my earnings corss the 10-lac boundary? Sorry to be so naive, but I have received quite conflicting opinions from various sources and hence just want to be sure when I hear the sweet words of you all. :))

Wait D.Joshi,

I would suggest you to go for a consultant in such matter.

You are providing the following services;

1. Creating characters and selling the right to use the same (permanent / temporary);

2. Software development and maintenance;

Sol.

1. If you are working independently and selling the rights permanently, then it is not covered under service tax law as there is no service;

but if you are only giving temporary rights, then it is subject to service tax. If such service recipient is outside India, then no service tax can be levied (Sec.66B of the Act read with Rule 3 of Place of Provision Rules, 2012). It does not matter, if you receive the same in foreign currency or not in such respect. But if you want to claim rebate of cenvat paid for such services provided, then you will have to receive the consideration in Covertible foreign currency (Rule 6A of Service Tax Rules, 1994).

But if you are working as salaried employee, then again it beyond the ambit of service tax, as it is not a service only.

2. Be careful in this one. If you are developing software completely, then the place of service recipient is to be considered, i.e., if it is outside India, then it will not be taxable (Sec.66B read with Rule 3 of Place of Provision Rules, 2012)

But if you are doing some repair or maintenance; then it is covered by Rule 4(a) of Place of Provision Rules, 2012, i.e., the location where such service has taken place shall be considered for taxability. Hence, in your case, you would be doing the same in India, hence such service would be taxable (Sec.66B).

I again request to consult a professional, if your turnover exceeds Rs.10 Lakhs (no tax if below this limit for you vide Notification No.33/2012-ST), as the laws have humungously changed and you might have noted that same by now.

Hope this is suffice...

Very lucidly analysed and explained by Vikas. I am bookmarking this for future reference.

Regards,

If you receive Indian Rupees from Payment Gateway in India for a foreign currency, It should be backed by a Foreign Inward Remittance Certificate to qualify for exemption.

We are a software development firm and most of our sales are exports. Only 40-50 thousand per year is local sales.

Do we need to register for service tax if our turnover crosses Rs. 10 lacks? 

Thanks

You do have to register once your turnover crosses the treshold and once your turnover crosses 10 lakhs you have to pay service tax on all services on which service tax is applicable. Therefore if the service tax on services where recepient is outside India and received in forex, you do not pay the tax and show it as exempt. On whatever services are deemed to be provided inside the taxable territory you pay service tax.

Even though Service Tax started as an off shoot of Central excise, the words domestic consumption has not been imported from central excise laws as far as the exemption is concerned for service tax. Therefore you have to pay service tax irrespective of the quantum of domestic consumption if your turnover is above 10L

In central excise it is clear that once you cros the turnover threshold you register irrespective of domestic or exports but they clearly worded duty if turnover of domestic consumption exceeds the treshold which unfortunately they have not done likewise in Service Tax. You are therefore penalised for your foreign turnover.

We have a company in india. We provide software service to company in USA.. but when they transfer the fund.. they convert it in INR and we receive money in INR via NEFT... We are running this business from 3 year.. Are we under service tax liability?..