Income tax on income received in foreign currency

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Vivek Rawal (Querist)
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06 August 2010 We are a private limited company who have provided services to a US based client. The nature of services ws knowledge based and included research study and preparation of reports. The income received will be in US dollars. Are we liable to pay service tax on the income received in foreign currency? And moreover can we avail any income tax exemption on the same?

Thanks very much in advance for your effort to respond.

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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07 August 2010 it shall be treated as export of service- hence no service tax-- further you can use the CC on input used for providing such services

Vivek Rawal

Vivek Rawal (Querist)
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07 August 2010 Thanks, Manmohanji. But our CA says as the services are provided from the country, we have to pay service tax. Service tax would be exmpted only if the service was provided sitting outside the country. also can you explain what you mean by CC on input? I will be thankful if you can mention reference to some clause that we can show to our CA.
Thanks for your kind effort.

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Snehal Parikh

Snehal Parikh (Expert)
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07 August 2010 Vivek,If you provide services from india and the person receiving services outside india, then you are not required to provide service tax as the services are export services. At the same time, you are not entitled to get service tax credit on differenct expenses,for which you have made payment and which are used in relation to your final output. Hence please take care and do not take credit on input services which are used in providing final output services which are exported.

Vivek Rawal

Vivek Rawal (Querist)
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07 August 2010 Thanks so much, Snehal.