Confusion on the "Service of Exports " have been tried to be clarified by CBEC through a circular dated the 24th February, 2009 stating that the relevant factor is the location of the service receiver and not the place of performance . Read the circular given below
F.No.137/307/2007-CX.4 (Pt.)
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
*****
New Delhi, dated the 24th February, 2009.
Subject: Applicability of the provisions of the Export of Services Rules, 2005 in certain situations
In terms of rule 3 (2) (a) of the Export of Services Rules 2005, a taxable service shall be treated as export of service if “such service is provided from India and used outside India” Instances have come to notice that certain
(i)Call centres engaged by foreign companies who attend to calls from customers or prospective customers from all around the world including from India;
(ii)Medical
(iii)
(iv)Foreign financial institution desiring transfer of remittances to India, engaging an Indian organisation to dispatch such remittances to the receiver in India. For this, the foreign financial institution pays commission to the Indian organisation in foreign exchange for the entire activity being undertaken in India.
The departmental officers seem to have taken a view in such cases that since the activities pertaining to provision of service are undertaken in India, it cannot be said that the use of the service has been outside India.
2.The matter has been examined. Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories:
(i)Category (I) [Rule 3(1)(i)] : For services (such as
(ii)Category (II) [Rule 3(1)(ii)] : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service, Security Agency service, Storage and Warehousing service) where the place of performance of service can be established, it is provided that provision of such services would be ‘export’ if they are performed (or even partly performed) outside India.
(iii)Category (III) [Rule 3(1)(iii)] : For the remaining services (that would not fall under category I or II), which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services), it has been specified that they would be ‘export’,-
(a)If they are provided in relation to business or commerce to a recipient located outside India; and
(b)If they are provided in relation to activities other than business or commerce to a recipient located outside India at the time when such services are provided.
3.It is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a legislation. Keeping this principle in view, the meaning of the term ‘used outside India’ has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a Category II service [Rule 3(1)(ii)]) arranges a
4.All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned. These instructions should be given wide publicity among trade and field officers.
5.Please acknowledge receipt.
6.Hindi version follows.
Yours faithfully,
(Gautam Bhattacharya)
Commissioner (Service Tax)
Tel: 23093027
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