My client is developing software for a US based company.
He has a software service contract with the company and the company provides him fixed amount for the tasks assigned very month.
I have seen many posts here which say service tax is applicable on software services, but there is no clarity on the software services that are exported.
Is he required to pay the service tax on the software export services?
For that purpose you are required to know the details of billing.
Means, in the bill which it is showed.
And for your doubt about software developing following comes under purview of servicetax,
(i) development of information technology software,
(ii) study, analysis, design and programming of information technology software,
(iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software,
(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a database, advice on proprietary information technology software,
(v) acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products,
(vi) acquiring the right to use information technology software supplied electronically.
Thanks Chintan.
Doubt still remains on whether service tax is applicable if the services are done for US company which means it is exported.
In the bill it is mentioned "Software development services as per requirement"
in your case its manpower recruitment, and servicetax liable.
Does it mean he has to pay service tax even when he is self-employed and works exclusively for US company?
Please refer to this link
https://india.gov.in/citizen/service_tax.php
In the exemption section it is clearly mentioned
"There is no service tax on export of services."
What does this mean?
Here is another link
https://ilovehyd.com/service-tax/export-of-services.html
It also says same thing
"Thus all the taxable services exported outside India are not leviable to service tax and therefore, exempt. Since tax is a destination based consumption tax and, therefore, if the service provided are consumed abroad, it is covered under export and therefore, not leviable to service tax. Some of the examples are that if a Management Consultant or a Consulting Engineer provides the consultancy service to a foreign company situated outside India, it will constitute direct export."
Any service tax experts who can clarify these confusions?
export of services does not means that these are zero rated and not in net of service tax, to avail the exemption u have to get registered and export the services under proper documentation.
however upto 10 lacs of services u have not to bother for such procedure, but aftrer that u have to export the services as laid down under service tax rules without payment of service tax.
Export of Service Rules, 2005
In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement.-
| (1) |
These rules may be called the Export of Services Rules, 2005. |
| (2) | They shall come into force on the 15th day of March, 2005. |
2. Definitions.- In these rules, unless the context otherwise requires,-
| (a) | “Act” means the Finance Act, 1994 (32 of 1994); |
| (b) | “input” shall have the meaning assigned to it in clause (k) of rule 2 of the CENVAT Credit Rules, 2004; |
| (c) | “input service” shall have the meaning assigned to it in clause (l) of rule 2 of the CENVAT Credit Rules, 2004. |
3. Export of taxable service.– (1) Export of taxable services shall, in relation to taxable services‚–
| (i) | specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), (zzzh), (zzzr), 4[(zzzy), (zzzz) and (zzzza)]4 of clause (105) of section 65 of the Act, be provision of such services as are provided in relation to an immovable property situated outside India; | ||
| (ii) |
specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv),(zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze),[(zzzf), (zzzp), (zzzzg), (zzzzh) and (zzzzi)]6of clause (105) of section 65 of the Act, be provision of such services as are performed outside India: Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India;
[Provided further that where the taxable services referred to in sub-clauses (zzg), (zzh) and (zzi) of clause (105) of section 65 of the Act, are provided in relation to any goods or material or any immovable property, as the case may be, situated outside India at the time of provision of service, through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed outside India, shall be treated as the taxable service performed outside India;]5 |
||
| (iii) | specified in clause (105) of section 65 of the Act, but excluding‚– | ||
| (a) |
sub-clauses (zzzo) and (zzzv); |
||
| (b) | those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and | ||
| (c) |
those specified in clause (ii) of this rule,when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service: |
||
|
Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.
[Provided further that where the taxable service referred to in sub-clause (zzzzj) of clause (105) of section 65 of the Act is provided to a recipient located outside India, then such taxable service shall be treated as export of taxable service subject to the condition that the tangible goods supplied for use are located outside India during the period of use of such tangible goods by such recipient.]7 |
|||
| 2[(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:- | |||
| (a) | such service is provided from India and used outside India; and | ||
| (b) |
payment for such service [x x x] 3 is received by the service provider in convertible foreign exchange.
Explanation.- For the purposes of this rule “India” includes the designated areas in the continental shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O.643(E), dated the 19th September, 1996.]2 |
||
4. Export without payment of service tax.- Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax.
5. Rebate of service tax.- Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.1
_______________________________________________________________________
Superscriptts indicating amendments
1 Notification Nos. 11/2005 and 12/2005 dated 19.04.2005
2As amended by Notification No.2/2007 Service Tax dated 01.03.2007
3Deleted [provided outside India] vide Notification No.30/2007 dated 22.05.2007
4 Inserted vide Notification No.30/2007 dated 22.05.2007
5. Inserted vide Notification 05/2008 - ST, dated 01-03-2008
6. Substituted vide Notification 20/2008 - ST, dated 10-05-2008
7. Inserted vide Notification 20/2008 - ST, dated 10-05-2008
(The principal rules were notified vide notification no. 9/2005-Service Tax, dated the 3rd March 2005)
hi guys,
I'm a freelancer & last year my income touched 8L+.
I provide software services in forms of creation, design, development, maintenance of softwares.
Please let me know if I have to pay service-tax after crossing 9L or is software-service has come under export & I can apply for an IEC code to get the exemption from service-tax.
Nitin you can take the benefit of 10 lac exemption limit hence you are not required to pay the tax on services and eport of service are zero rated under export of rules 2005 hence no payment of service tax.
CAclubindia
