Foreign marketing services

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Francois Saussez (Querist)
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05 December 2012 Hi,

A foreign company is provinding our Indian Company with Marketing Service such as creation of advertising material, website, brochure design,...

All these services are performed from Belgium and we have been told that Service Tax will be available on these service fees.

Is that right?

In which cases foreign services are not subject to Service Tax?

Is there any consequences if the foreign company is a sister or mother company of our Indian Entity?

Thank you for your help

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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05 December 2012 As the recipient of the service in India you would be liable under reverse charge for payment of ST. The maybe available as credit if admissible.

Francois Saussez

Francois Saussez (Querist)
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05 December 2012 Thank you very much for your quick answer.

1 last question.

These services will be performed outisde India, is there any way we could avoid to pay any taxes on them?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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25 July 2024 In the context of services provided by a foreign company to an Indian entity, such as marketing services (creation of advertising material, website design, brochure design, etc.), the taxation in India is governed by the Goods and Services Tax (GST) regime since the implementation of GST in 2017. Here are the key points to consider:

### 1. Applicability of GST on Foreign Services

- **GST Applicability:** Under GST, services provided by a foreign company to an Indian company are generally taxable. These are treated as "import of services" under GST law.

- **Tax Liability:** The Indian company receiving the services (importer of services) is liable to pay GST under reverse charge mechanism (RCM) on the services received from the foreign company.

### 2. Conditions for Taxability

- **Import of Services:** Services provided by a foreign company to an Indian entity are considered "import of services" under GST.

- **Place of Supply:** The place of supply for such services is the location of the recipient of services (Indian company).

### 3. Exemptions and Exceptions

- **Exemptions:** Some services provided by foreign companies may be exempt from GST. However, marketing services such as advertising, website design, and brochure design generally attract GST.

- **Specific Exclusions:** Certain categories of services may be excluded from GST, but marketing services are typically not excluded unless specified.

### 4. Consequences of Relationship (Sister or Mother Company)

- **Related Party Transactions:** If the foreign company providing services is a related party (sister or mother company) of the Indian entity, it does not impact the GST liability directly. However, the relationship may have transfer pricing implications under income tax laws, which are separate from GST.

### 5. Mitigating Taxation

- **Avoidance of Tax:** There is no straightforward way to entirely avoid paying taxes on such services. The Indian entity is legally required to pay GST on imported services under RCM.

- **Input Tax Credit (ITC):** The Indian entity can generally claim input tax credit for the GST paid on imported services, provided it is used for business purposes.

### Conclusion

In conclusion, for the marketing services provided by a foreign company to an Indian entity, GST is applicable under reverse charge mechanism. The Indian entity must pay GST on these services and comply with GST reporting requirements. There are no exemptions specifically for marketing services unless specified under GST law. If the foreign company is related (sister or mother company), it affects transfer pricing under income tax regulations, not GST directly.

For precise advice tailored to your specific situation, consulting with a GST expert or tax advisor in India would be advisable to ensure compliance with GST regulations and optimize tax implications.