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Contractual consultancy and service tax applicability

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Vikram Pandya

CA Business

23 Points Posted on 29 January 2014

Dear All, This is my fist post to this group and I hope I will get a response from my fellow members. Following are the fact of the case.

(1) A person is currently an employee of the public company.

(2) That person wants to now act as an consultant to the same company. Under this new role, he is not going to raise any periodic invoices but he is going to get remuneration/fees as specified in a contract for a given tenor (also given in contract). Total contract amount will be greater than 10lakhs p.a.

(3) Apart from this he also earns income in USD from overseas clients which is eligible for exemption under export of service rules. This USD revenue is also more than 10 lakhs p.a.

Questions:
(1) Does his proposed contractual consultancy attract service tax?
(2) Will his proposed contractual consultancy also extend service tax on USD income which is currently exempted?

Any comments/views are highly appreciated.

Thanks in Advance :)

Replies (1)

KCJM and Associates

Chartered Accountants Firm

678 Points Posted on 29 January 2014

Dear Mr Pandya,

In our opinion, following are the answers to your query:

The contractual consultancy service proposed to be provided to the domestic Company will be subject to service tax as the consultancy service proposed to be provided is not exempted from ambit of service tax vide Notification No. 25/2012 effective from 1st July, 2012, which specifically provides the list of services which are exempt from the ambit of service tax.
You will continue to enjoy exemption on the services provided to overseas clients from the levy of service tax if all the limbs in the definition of "Export of Service" are satisfied as there is no nexus between exemption of service tax on export services and levy of service tax on contractual services provided in taxable territory.

You may also click here for any further assistance on service tax matters.
https://www.kcjm.in/