I run my Language Translation Agency and provide translation services in Indian languages. We translate document (text) from one language to another language. And My Translators are also based in India. I started my Translation Agency in 2009-10. To open an account in bank, Bank asked for a registration number. This is why I took service tax number. Since then I am providing Translation services to Indian clients. However My turnover is not exceeded than 4-5 lacs. However as I have service tax number so I am paying service tax regularly. Now from this Financial year 2013-14, I have also started provide services for some foreign languages also and for foreign clients also. For this I have to take services to Translators outside of India. for example If I have to provide Chinese Translation services to my USA based client, I take the help of china based translator. Client send me document through email and I also forward the document to my translator. When he/she translates it, send me back to and I forward it to my client. Now client pays me through paypal in (USD). I do not charge any Service tax to my client. I also have to pay to my Translator through paypal in USD. When client pays me through his/her paypal account to my paypal account. Paypal deducts 4-6% amount. Suppose Client sends me 100 USD to my paypal account. When I take this amount to my Paypal amount the amount remain 96 USD. Moreover when I withdraw this amount to my bank account in Indian currency. I get Rs. 2/- less on each USD. Suppose USD Rate is Rs. 62/- so I get Rs. 60 for each USD. Then I have to pay to my Translator, for this I use bank transfer or paypal. Mostly out of India translators prefer payment through Paypal, Moneybooker, or Western Union. To Pay translators through paypal I have to use My Credit card and I also have to pay Rs. 2/- more on each USD, to my Translator. If I have to pay 10 USD to my translator, so I have to pay Rs. 640/- if Rate of one USD is Rs. 62/- . Now, I have not returned my Apr - Sept 2014 Service tax yet. I just want to know Should I pay the service tax on foreign business also. Especially in that case when a lot of amount is already deduct from the net amount.
You provide services of translation to foreign clients and it appears it satisfies the conditions of service tax rules for export of services. Therefore no service tax is payable thereon. You should report the same in your service tax return as export of services. As regards the services received from foreign vendors, the same is import of services and tax is payable thereon under reverse charge mechanism. There is no deduction of bank charges against service tax liability. However, if the expenses on which you have to pay service tax under reverse charge are used exclusively for the purposes of export of services then you may claim the refund of the same.
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