Service tax on services provided outside India

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Earlier, there was no definition for ‘export of service’ under Finance Act, 1994 or the related rules. It was then clarified that service tax is a destination based consumption tax and that it is not applicable on export of services. Then, Export of Services Rules, 2005 were issued for giving a clear idea on export of services. These rules went through a lot of amendments before being withdrawn finally on 01/07/2012, after which the Place of Provision of Service Rules, 2012 came in to force.

 Rule 6A was inserted in Service Tax Rules, 1994 through Notification No. 36/2012-Service Tax. As per this rule, provision of any service shall be treated as an export of service if the following conditions are fulfilled:

 1.      The service provider is located in the taxable territory

2.      The service recipient is located outside India i.e. outside the taxable territory

3.      The service being provided does not fall under the Negative List as specified by section 66D of Finance Act, 1994

4.      The place of provision of the service is outside India

5.      The service receiver pays for the service in convertible foreign exchange

6.      The service provider & the service receiver should not be branches of a single entity. If it is so, then any transaction relating to service between the two would not be treated as export of services.

 Hence, only if all the above conditions are satisfied, then a service shall be treated as export of service.

 Taxability of Export of services

 According to the Place of Provision of Service Rules, 2012, the place of provision of service shall be determined and if such place is outside India, then no service tax will be leviable. Such a service provider will also be eligible to rebate of duty/tax paid on inputs or input services under Cenvat Credit Rules, 2004.

Related posts:

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  2. Service Tax On Legal Services
  3. Service Tax on works contract
  4. Every assessee make available the records for the scrutiny of the officer or the audit party – Service Tax Third Amendment Rules 2014
CA Amol Fegde
Amol Makarand Fegde is practicing Chartered Accountant since 2005. He is specialised in Service Tax. He can be reached at amolfegde@gmail.com.

3 thoughts on “Service tax on services provided outside India”

  1. Dear Mr. Amol, I want to Know In Intermediaries case service tax is applicable or not. The case is Service Provider is in Taxable territory service receiver is non taxableterritory and service ( Business Promotion ) provided in Taxableterritory .

    Pls. advice in current situation service tax liable or not.

    Manoj Bhatt

    Reply

  2. Dear Vishal Sir,
    I have a small company providing online accounting and book keeping services to a client in US. Last year the value of service I provided was 8 lakhs roughly but this year it may cross 10 lakhs. I want to know that do my services fall under regular Service tax or RCM Reverse mechanism? I am terribly confused on this kindly guide me.

    Thanks and Regards

    Rajeev

    Reply

  3. Hello Sir,

    I am a small-time entrepreneur based in Odisha. My company sell newsletter subscription to clients outside India. All payments we receive is in either pound or dollar. Our service is delivered in outside India, please let me know if we are liable for service tax. This year we have already recorded revenue of around 7 lakh till now, will we have to pay service tax after we have 10 lakhs of revenue or we don’t have to pay service tax even if it crossed 10 lakh.

    Regards,
    Hemanta

    Reply

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