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Foreign Consulting Income

Suresh (Director) (25 Points)

22 January 2010

Hi everyone,

I am running a small scale software company in bangalore. Our nature of business is we have our employee working for an MNC company in bangalore and we invoice the MNC company directly in US. we will be getting payment for consulting pay directly to our bank from US in dollars. then we will pay our staff from the payment.

My queries:

1. Since this service is being provided to a foreign company, will it be exempt from Service Tax?

2. Do I still need to register for Service Tax ?

3. How will i show the income to the goverment? any other tax need to paid? if yes, how?

I Appreciate if you could spend on answering my query.

Thanking you

Suresh.

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3 Replies

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 22 January 2010

The services provided by you are Information Technology software services and the rules under the export of services rules specify the following conditions for THIS service:

1. Service recepient should be outside india

2. Service has to be used outside India

3. Amount should be recived in CFE.

Since you meet all the conditions you are not reqd to register.

However one of the benefits of export of services is that the input services credit can be refunded/ reabtes along with the excise duty/ CVD ( on imports) on capital goods used for provding such services.

If the amount is substantial then it makes sense to regsiter and claim the credits.

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Suresh (Director) (25 Points)
Replied 22 January 2010

Thank you Mr.Madhukarji.

Can you please clarify my further queries.

1. What is CFE? are you specifying about the currency we are receiving from US?

2. We are not paying any excise duty as we are not importing any goods. My annual billing will be around 25 lakhs per annum. So if i register for Service tax, is it mantatory to pay service tax (which is refundable). if yes, how much percentage of amount i need to pay as Service tax. Also please note that i am not able to claim credits as i am not importing anything. Is there anyother way i can claim the credit?

Please clarify

Thanks in advance for your response.

Suresh.

Rituparna Chanda (Proprietor) (30 Points)
Replied 27 January 2010

Hi all,

I am software service provider running my own proprietorship business. I am presently having a foreign client who is paying me in dollars transfering my payment( which includes 10.3% service tax) to my current account in Kolkata branch. The above queries are partly relevant to me, along with that I have some more queries.

1. Do I need to register under any other taxation rules in India other than service tax and trade license pymt?

This year I am going to pay my first IT return and my turn over will be something around Rs5 lakhs pa

2.The service tax category has been wrongly registered under Business Auxiliary Services whereas it should have been done under information technology software services. Its been already almost 1 yr and I have also paid 2 returns under this category. How do I change this?

3. It seems I didn't have to register at all for my foreign client's pymt. Then in this regard following your previous reply I want to know what is CFE?

4. If in future I have domestic clients then I would be needing this service tax regn and category change( back to my qs 2).

Waiting eagerly for your reply.

Thanks & Regards,

Rituparna C.