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service tax on import of service

CA. Vipin Gupta (Accounts Officer) (146 Points)

11 May 2010

we are receiving services of technical consultant from italy.

on the services received we have to bear and deposit service tax as import of service

Now foreighn consultant submits the bill for 44,000.

but we are paying only 42,000 after deducing penaly from him

now quesiton is that whether we have to pay service tax on 44,000 or 42,000

thanks in advance

please put reply only if has some concreate evidence or case laws or firm knowledge about the topic

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8 Replies

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 14 May 2010

Dear Vipin,

Service tax is always payable on payment bases. Therefore what ever amount you are remitting to the foreign service provider you are liable to pay ST on that amount only. You may have to produce the final remitence certificate from your bank in needed by the department in future.

Regards

Jeevesh Mehta

9811617186

Ankit Saraogi (Associate Consultant) (110 Points)
Replied 15 May 2010

Sir,

I agree that Service tax is always payable on payment basis, however I do not agree with Mr. Jeevesh.

Gross Value of Service charged is Rs. 44,000

However, the Service receiver deducts Rs. 2000 as penalty which is as good as paying Rs. 44,000 for the service received and reimbursing Rs. 2,000 as penalty.

Thus, I am of the opinion that S T is payable on Rs. 44,000 and not Rs. 42,000

SIVASIVA (FCA, Future CA) (4935 Points)
Replied 11 June 2010

yes S.T. is payable only on 44,000

M Narasimha Murthy (Proprietor) (26 Points)
Replied 15 June 2010

We are a 100% EOU software company importing Software Licenses. Do we have to pay service tax on the imorted licenses. ?

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 15 June 2010

Providing the right to use any software supplied electronically would be covered under the ambit of taxable services. but as the no import duty is payable by EOU, the same provision can be applied in the case of Import of Service .

M Narasimha Murthy (Proprietor) (26 Points)
Replied 15 June 2010

Thank you Mr Jeevesh. May be I will rephrase my question.

We are a 100% EOU software company. we do engineering services for our parent company. therefore our billing is done to the parent company under export of software services.

We will need certain high end softwares to work-on our projects and we import the software licenses for the same.

Kindly see if these facts make any difference to your advise.. Thanks a lot in advance

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 15 June 2010

There wont be any change.

Regards

Jeevesh Mehta

Ph:9811617186

1 Like

Bob Forest> (Private) (22 Points)
Replied 26 July 2010

Tax event for service tax remittance on services rendered by foreign supplier

Hello,

Could you please help me in the same field area?

Indianco, is an Indian company who receives technical Services rendered from abroad by ForeignCo within the same global industrial group. Technical services could be either: allocation of the information network costs, or engineering services.

Indianco has not paid these services for two years now for different reasons (was short in cash for a while).

- When Service tax was due on these services?

- What are the tax penalties for late remittance? What is the taxable event here (Date of the reception of the invoice, or date of payment of the invoice)?

- How the new changes in the tax law and subsequent decision of the Mumbai ITAT (21/05/2010 Ashapura) will affect the payment to the foreign companies for the account payables due on the years 2008 and 2009? Is the TDS due on these services, in addition of the service tax?

Now, the IndianCo is providing engineering and IS/IT services to Foreign Co. Could it be feasible to imagine a settlement of the transactions since the balance in favour of the Indian co, which will provide more than received?

Thanks in advance for your comments.

The Mumbai Income Tax Appellate Tribunal (ITAT) held on 21 May 2010 that the mere utilization of services in India is sufficient to attract tax liability in India and that the actual rendering of services in India is no longer required (Ashapura Minichem Ltd.v. ADIT). As a result, tax must be withheld on such payments.