Is export of services exempted ?

This query is : Resolved

Guest

Guest (Querist)

03 December 2009 Dear Experts,

I would like to ask that 'if pvt ltd company (Consulting engineer (Having engineers) - provide legal consultancy in patent to other co) is providing service to foreign client (also co) and invoice & remittance currency is in $ (Dollar), then that service is exempted from the service tax or not ?'

Please reply me with suitable evidence or circular.

Thx in advance!

ANIL JANGID

ANIL JANGID (Expert)
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03 December 2009 YES EXMPTED.

Guest

Guest (Querist)

03 December 2009 I know Mr. Jangid but I need proper circular or evidence, I need to provide that doc to our foreign client.

In the act 'Export of services' explanation is missing, so I'm just searching something in written here to prove myself.

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Hardik

Hardik (Expert)
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03 December 2009 Your service would fall under Rule 3(iii) of export of servcie rules 2005, wherein receipent of services is located outside india Please refer to Export of services rules 2005 under notification no 9/2005 -St dated 03/03/2005 effectve from 15-03-2005 for more information you can also refer to Notification no 21/2003 dated 20/11/2003 and

Guest

Guest (Querist)

03 December 2009 Dear Hardik,

Thank you for your reply. However, I'm still in confusion about this act.

Could you please provide me complete details in this relation.

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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05 December 2009 Export services are not exempted from service tax. However, you can export taxable services without payment of service tax. Since, there is a lot difference between exempt and without payment of tax. Exempt mean it is exempted from the levy itself. Whereas without payments of tax means these service are liable for services taxes however as you are exporting such services you can export without payment of ST.

Guest

Guest (Querist)

15 December 2009 Sorry to interrupting u Mr. Reddy.. but I would like to bring in ur notice some clarification in relation to export of services, which I found in Act, plz go though it and reply me with correct basis on which u said above statement:

Whether export of services are exempted from Service Tax? If so, what would constitute exports? Whether secondary service providers supplying service to primary service providers are exempted from Service Tax if the primary service is exported?
Ans. The Service Tax is leviable only on the taxable services supplied within India except Jammu and Kashmir. Thus all the taxable services exported outside India are not leviable to service tax and therefore, exempt. Since tax is a destination based consumption tax and, therefore, if the service provided are consumed abroad, it is covered under export and therefore, not leviable to service tax. Some of the examples are that if a Management Consultant or a Consulting Engineer provides the consultancy service to a foreign company situated outside India, it will constitute direct export. Similarly, if service provider in India desputes his consultant abroad or provides the service to foreign customer abroad by opening a branch office or any other establishment in that country, same would also constitute exports. However, where a foreign company comes to India and takes the services of manpower recruitment agency in India for recruitment of personnel, the service tax will be leviable as it does not amount to export. Similarly, foreign tourist coming to India and enjoying taxable services (even though making payment in foreign currency) are taxable and are not exempt as it does not amount to export.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003]

Awaiting your reply.

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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16 December 2009 Hi Deepak,
Well I understood your point. Pls let me tell you about the exemption of services and exports without payment of service tax. There is a lot difference between exempted services and without payment of service. Exempt mean from the levy itself those services are exempted whereas without payment of services means these services are basically levy able for service tax but for limited purpose (as you are exporting the service) these services can be made without payment of service tax. Hence, the exports are not exempted services but are taxable services under services tax law provisions. Further, read Rule 4 of Export of Service Rules, 2005. Think that if have not received foreign currency or some ambiguity about to treat whether the services are being exported or not in such a cases, you have to pay the service tax.

Should you need any further information, please do let me know.
Thanks,
Hanumantha Reddy

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Guest

Guest (Querist)

16 December 2009 Thanks and I appreciate your efforts on this matter. Though below example, I'm going to explain my problem, plz read it carefully and reply me with suitable support:

We(Pvt Ltd co)are basically Consulting engineers and have only engineers like Mechanical, electrical and others. They provide their consultancy to foreign companies on patents matters, based on that facts (which provide by our engineers) lawyers sue the case against competator co and prevent their product for launching in market or manufacture. So, as per accounting point of view, I would like to ask that if company provide services to foriegn clients (invoices/remittances currency is in dollars) and service is also used outside from India, hence in this case we are liable to pay service tax or Is this service treat as under exempt export service ?

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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16 December 2009 You are not liable to pay service tax if you exported the services. Hence, the services are without payment of service tax.Further, if you have any un utilized iput tax serives in this matter can go for refund (a point here is to be noted that if your services are exempted serives then you can not go for refund of the same). However, your services are taxable services, you can go for refund.
Hope the above clarifies you.

Guest

Guest (Querist)

17 December 2009 Thank you so much for your clarification.