Service tax on Export Services

Hello Adil,

I am trying to answer your second  & third part.

1)  Here ,XYZ  bills ABC for customs clearance charges.

    XYZ  again hands over Customs Clearance to local Co. who bills XYZ with a service tax component .

The question is whether XYZ has to pay service tax  or not.

A customs House Agents' service is a taxable service. So, XYZ ,a taxable service provider is outsourcing a part of his work to a subcontractor ,the local Co.,who is also a taxable service provider in the same bracket.

Services provided by the subcontractor are in the nature of input services. Service tax is therefore leviable,whether or not the services are provided in his capacity as a subcontractor and whether or not such services are used as input services.The fact that a given service is intended for use as an input service by another service provider does not alter the taxability of the service provided.

So XYZ should bill ABC with service tax component and take the input credit as paid by it to local Co.

2) The same reason and effect is to be given in last leg also.

Receiving your advance thanks and with all good wishes,

Sanjoy Saha

Dear Sanjoy,

         thank you for your detailed response. Another small clarification is that XYZ always bills ABC in USD. ABC is a company established in the US. So under export services is the service not exempted from service tax ?

Mr. Kumar has replied to my query saying its exempt, refer below link

/experts/export-service--489240.asp

Thanks again

Best,

Adil

Hello Adil,

Exported  Service is exempt from Service Tax.

For treating a service as export of service following conditions must be present:

(a) The service should be provided from India and used outside India.

(b) Payment for such service is received by the service provider in convertible foreign exchange.

As per clarification by CBEC ,”used outside India”,mean  “ benefit should accrue outside India”.

Now ,the basic issue for consideration is  whether service of  XYZ  is used  outside India i.e by ABC.

The benefit accrues to the customers of US as they are paying to ABC.

Service provided  by  XYZ is a provision of service on behalf of client outside India.

So service of XYZ to ABC is exempted from service tax net.

I am grateful  to you for informing me about Mr. Kumar’s Link.

Thank You,

Sanjoy  Saha