Service tax on inspection that took place outside India
This query is : Open
23 May 2009
We are a 100% EOU manufacturing auto components and exporting to USA. We have a payment terms of DA 60 days with our customer and have shipment terms of CIF Detroit. In June 2006, some of our components were found to be rusty and our customers in USA got the consignment sorted at their plant in USA by a third party sorting agency and deducted the sorting cost amount from payment due to us. Since the rust problem persisted, our customers asked us to directly contract the sorting agency for sorting at our customer's plant in USA, all our consignments after arriving in the plant but before accepting the consignment. The sorting agency directly billed us and we paid them a total of almost 37 lacs in 2006-2007 and 2007-2008 periods. The sorting agency does not have any office in india and all the sorting was done in the USA. Are we liable to pay service tax on the sorting service that was provided in the USA on goods that were in USA at the time of sorting just because we have paid for that service? Looking forward to the experts' opinions at the earliest.
24 May 2009
If the service is one of inspection the same has been performed outside India and therefore there is no liability.
Further services provided and recived outside India are not under the juridisdiction of India.
Further services provided and recived outside India are not under the juridisdiction of India.
25 May 2009
Hello Mr. Hiregange,
Thanks a lot for your encouraging response regarding our query. If possible, please provide the concerned rules, notifications, circulars nos. pertaining to the provision that in our case, since the inspection service was performed in USA, we would not be liable to pay service tax.
Thanks a lot for your encouraging response regarding our query. If possible, please provide the concerned rules, notifications, circulars nos. pertaining to the provision that in our case, since the inspection service was performed in USA, we would not be liable to pay service tax.
26 May 2009
Pl go to the Export of Services Rules 2005 cbec.gov.in
The only issue is to be sure that the same is inspection activity and not juts a sorting activity.
Services outside India Orient Crafts case - High Court would also be relevant.
The only issue is to be sure that the same is inspection activity and not juts a sorting activity.
Services outside India Orient Crafts case - High Court would also be relevant.
26 May 2009
Is inspection and sorting not the same as defined in section 105(zzi). Why is the treatment of sorting activity and inspection different?
You have mentioned reference to Export of Service Rules 2005, but we are being told by the Excise Department that it is import of service as we paid the inspection agency in USA.
You have mentioned reference to Export of Service Rules 2005, but we are being told by the Excise Department that it is import of service as we paid the inspection agency in USA.
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