If an Indian Exhibition company agreed to conduct an Exhibition for an Indian company (Like CII, FICCI ...etc) in Hannover Germany , and the amount charged in Indian Rupees . The Exhibitor( Service Receiver ) refused to pay Service tax for this service because the execution of the work in Germany. But the exhibition company ( Service Provider ) argues that the agreement is executed in India and the payment also made in India in indian rupees. so the service receiver is liable to pay service tax in India
Kindly give suggestions about the quary ( on the basis of Sub Rule (1) of Rule 3 of Export of Services Rules 2005 or Circular No:111/05/2009 dtd 24.02.2009 or any other relevant circular and notifications )
20 August 2009
Services provided and recived outside India are otuside the pruview of the taxable services deifntion and therefore there appears to be no liability on this transaction.
20 August 2009
Thanks for your valuabe suggessions,
i have some doubt for clarification, If the consideration received for providing that service is received from India and in Indian ruppes , the dept demands tax for that receipts
if it is wrong , kindly advise me to justify the officials of dept & the exhibition company
More over what are the critiria for export of services like this case ( the Service Provider and Service Receiver in India and the service provided in outside India ) Most of these cases are in the field of exhibtion & Event management
if any one have some previous cases / circulars about these issue kindly forward to me
24 July 2024
The query revolves around the taxation of services provided by an Indian exhibition company to conduct an exhibition in Hannover, Germany, for an Indian exhibitor. Here's a structured response addressing the points raised:
### Service Tax on Export of Services
1. **Place of Provision of Services**: As per the Service Tax rules and Export of Services Rules 2005, the place of provision of services is crucial in determining whether a service qualifies as an export of service. Generally, services provided in relation to an exhibition conducted outside India are considered as exported services if certain conditions are met.
2. **Criteria for Export of Services**: - The service should be provided from India but utilized outside India. - Payment for the service should be received in convertible foreign exchange or in Indian Rupees wherever permitted by RBI. - The service recipient should be located outside India at the time of provision of service.
3. **Relevant Circulars and Notifications**: - Circular No. ____ dated 24.02.2009 provides guidelines on the taxation of services under the Export of Services Rules. It emphasizes that if the service provider is in India and the service recipient is outside India, and if other conditions are satisfied, the service can be treated as an export of service.
4. **Execution of Agreement and Payment**: - The fact that the agreement was executed in India and payment was made in Indian Rupees does not necessarily negate the export status of the service. What matters is the nature of the service and where it is utilized. - In your case, if the exhibition is being conducted in Hannover, Germany, and the primary recipients or beneficiaries of the service (the exhibitors) are also from India, this could complicate the classification under export of services rules.
5. **Challenges and Justification**: - The exhibition company's argument that the agreement was executed in India and payment was made in INR might lead the tax authorities to argue that the services were effectively utilized in India. This could potentially attract service tax liability. - To justify export status, it would be important to emphasize that the main beneficiaries of the service (the exhibitors and their representation) are located outside India, and the services are predominantly used outside India.
### Recommendations
Given the complexities involved, it's advisable to: - Review the specific terms of the agreement and the nature of services provided. - Ensure compliance with the Export of Services Rules and relevant circulars. - Consult with a tax expert or legal advisor specializing in international taxation to determine the applicability of service tax and to prepare a robust defense or justification if required.
### Conclusion
The determination of whether services provided for an exhibition in Germany qualify as export of services under Indian tax laws requires careful consideration of the place of provision, utilization of services, and other relevant factors. Detailed analysis and adherence to regulatory requirements, along with professional advice, will help in resolving the issue effectively.
CAclubindia
