Applicability of service tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 March 2016 Dear Sir/Madam, We are providing recruitment services in India and outside India. For Bills issued to Domestic Clients, we are charging service tax on the same. For Outside India Clients we are not charging Service Tax. Kindly let us know under which rule it will not be liable to Service Tax and any compliance required for this exemption, if any.

Thanks in Advance.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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24 March 2016 Supply of Manpower Services outside the taxable territories can be treated as export and hence exempt from tax, if and only if all these three conditions are fully applicable:
(1) The service recipient is a non-resident and has no office, place of business or representatives in the taxable territories;
(2) The service provider a resident provides the service outside the taxable territories; and
(3) The consideration is received in convertible foreign exchange through proper channels.

All the three conditions should be present.

Whether the service is provided abroad will be determined by the simple test - even if the interview takes place in India, the non-resident service recipient receives the candidate only abroad - i.e till the candidate reaches abroad, there should be no benefits received by him in India. In other words, except for the appointment letter, the interaction starts abroad and not in India. Even the reimbursement of the VISA and ticket charges should be available only abroad - otherwise the service would be deemed to have been rendered in India and the service provider would be liable to pay service tax, irrespective of whether he has recovered it from the service recipient or not.