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Applicability of service tax

Sweta Agarwal (Consultant) (47 Points)

24 February 2014

Hi all, My client is involved in providing software support to its client in US and also provides for maintenance of software. The receivables are in foreign exchange. It has only one client. The invoicing is done based on manpower cost + markup. My query is whether he is liable to charge service tax or not. What would be the place of provision in this case?

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6 Replies

CA Shraddha Vora (Teamhead) (149 Points)
Replied 24 February 2014

According to place of provision rules,

9. Place of provision of specified services.- The place of provision of following services shall be the location of the service provider:-

(a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) Online information and database access or retrieval services;

Thus if the software is provided by way of online information and database access or retrieval, the same will be taxed in India, being the place of service provider.

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CA Shraddha Vora (Teamhead) (149 Points)
Replied 24 February 2014

According to place of provision rules,

9. Place of provision of specified services.- The place of provision of following services shall be the location of the service provider:-

(a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) Online information and database access or retrieval services;

Thus if the software is provided by way of online information and database access or retrieval, the same will be taxed in India, being the place of service provider.

CA RAHUL PATEL (PARTNER) (57 Points)
Replied 25 February 2014

If u could throw some more light on nature of activity we shall be able to better appreciate taxation. Generally software support and maintenance may not result into online database access n retrieval setvices. So rule 3 and 4 may also be considered over rule 9 looking to exact nature of servicea.

Sweta Agarwal (Consultant) (47 Points)
Replied 25 February 2014

Dear Shraddha and Rahul, I have looked into that aspect, and these activities do not fall under the purview of online data retrieval system. My concern is that since the billing is done based on the manpower cost + markup, will it not be classifiable under manpower recruitment, because the company has no other clients apart from the US client. In such a scenario what can I take the place of provision. I request others also to please participate

CA RAHUL PATEL (PARTNER) (57 Points)
Replied 25 February 2014

It doesn't matter as to how would u value ur billing....rev place of provision....if there is any software component required tobbe brought into India in physical or soft manner and thwn process is carried out ruke 4 shall be applicable....if not so rule 3 will apply n accordingly place of provision shall be outside Indian n hence non taxable. Reg manpower supply I believe it shall not be considered as manpower supply merely becoz u bill accordingly....u shoukd actually look at the scope of work n then take decision.