IS SERVICE TAX PAYABLE ON SERVC CGS RECD FROM FOREIGN CLIENT

This query is : Resolved

KISHOR D ADHIA (Querist)
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13 March 2011 MY CLIENT IS A RECRUITING AGENT HE RECRUITS CANDIDATES FOR MIDDLE CLIENTS AND RECEIVES SERVICES CHARGES FROM CANDIDATES AND IN SOME CASES HE IS NOT SUPPOSED TO CHARGE TO CANDIDATES AND RECEIVES SERVICE CHARGES FROM FOREIGN CLIENTS

I WAS GIVEN UNDERSTAND BY THE SERVICE TAX DEPT THAT IT IS NOT TAXABLE I.E. SERVICE CHARGES RECD FROM FOREIGN CLIENTS IN USDOLLORS ON IN FOREIGN CURRENCIES.

NOW SOME EXPERTS SAYS THAT IT IS TAXABLE

KINDLY ADVISE ME WHETHER MY CLIENT SHOULD PAY SERVICE TAX ON SERVICE CHARGES RECEIVED FROM FOREIGN CLIENT OR NOT?

THANKS

KISHOR D ADHIA

Porwal Consultancy

Porwal Consultancy (Expert)
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13 March 2011 If services is provided to a client in India than it is taxable, merely receiving of payment will not attrack service tax liability.

KISHOR D ADHIA

KISHOR D ADHIA (Querist)
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15 March 2011 my clinet recruits from india to middle clients and he receives service charges from foreign clients in foreign currencies. Is it taxable?
kishor d adhia

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 ### Service Tax on Charges Received from Foreign Clients

**Service Tax on Export of Services:**

1. **Nature of Services:**
- If your client, a recruiting agent, provides services to foreign clients (e.g., recruitment services for candidates) and receives service charges in foreign currency, this typically constitutes an export of services.

2. **Export of Services Definition:**
- According to the definition under Indian Service Tax law (which has now been replaced by GST), an export of service is defined as:
- The supplier of the service is located in India.
- The recipient of the service is located outside India.
- The place of supply of the service is outside India.
- The payment for such service is received in convertible foreign exchange or in Indian rupees wherever permitted by the RBI.
- The supplier and recipient are not merely establishments of a distinct person.

3. **Taxability:**
- **Service Tax (Pre-GST)**: Under the Service Tax regime, services that qualify as export of services were generally exempt from Service Tax. This was because the law provided for zero-rating of exports, meaning no Service Tax was charged, but a credit of input service tax could be claimed.
- **GST (Post-July 1, 2017)**: Under the GST regime, export of services is zero-rated. This means that while the service provider does not charge GST on the export of services, they can claim a refund of the input tax credit on inputs and input services used in the provision of these services.

4. **Current Position (Under GST):**
- **Zero-Rated Supply**: Under GST, your client's charges for services provided to foreign clients would be considered a zero-rated supply. This implies no GST is charged on the invoice to the foreign client, but your client can claim a refund of the input tax credits.
- **Documentation**: Ensure proper documentation is maintained, including proof of payment in foreign currency, a contract with the foreign client, and evidence that the place of supply is outside India.

### Conclusion

**For Services Provided to Foreign Clients:**
- **Service Tax (Pre-GST)**: Not applicable if the services qualify as export services.
- **GST (Post-July 1, 2017)**: Zero-rated, meaning no GST is charged, but a refund of input tax credit can be claimed.

Make sure to review the specifics with your tax consultant or legal advisor to ensure compliance with the current regulations and accurate documentation for claiming any refunds.