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Foreign currency

NIK (MLSI) (34 Points)

02 July 2012

Hi Guys,

i am proprietor in Delhi. I have my already got my service tax numbers.

i basically work for a UK based organisation. the payment that comes into India from there comes in GBP £.

My query is if this £ that come into my account is supposed to have service tax and am i liable to pay service tax for this amount that come is GBP

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13 Replies

Prasad (Sr. Manager) (617 Points)
Replied 02 July 2012

Service tax is not applicable on export of services; however do declare the value as exports in your returns. You can also claim refund of your accumilated cenvat credit.

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Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 02 July 2012

There is implication of service tax in the present case, until and unless you provide any service to the UK firm from here. Hence, clarify the issue as it is very much in brief.

NIK (MLSI) (34 Points)
Replied 02 July 2012

Hi Guys,

the services we provide are mostly design services and graphics related. more in the terms of graphics creation in 3D. Apart from that there is no other service that we provide.

NIK (MLSI) (34 Points)
Replied 03 July 2012

Hi Ajit,

Be provide design services to the Uk based firm. BAsically we finish the graphics and 3D work and send it across to the Uk based firm. Then they mkae the payment accordingly in GBP,

This money come to India in GBP.

It is also deposited in the Bank in GBP and can be converted to INR when we want.

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 03 July 2012

So what is your query. Service tax will be applicable for the same.

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NIK (MLSI) (34 Points)
Replied 03 July 2012

My querry is that bacause the money that is paid to us here in foreign currency is it taxable?

I am actually confused as there are a lot of people stating that cause the money that is paid comes in GBP it is exemted from service tax.

I would like to know if this is correct.

and as i am the service provider getting payment in forign curreny will this money be taxable at 12.36% ?

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 03 July 2012

Yes you will be chargeable to service tax.

Prasad (Sr. Manager) (617 Points)
Replied 03 July 2012

Hi Ajit

under which section is service tax applicable. the service provider is in taxable territory and service receiver is outside the taxable territory.

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 04 July 2012

Thank You Mr. Prasad. As per Rule 3 of the Place of Provision of Service Rules, 2012, if the service receiver does not has a business establishment in India, service tax will not be imposed on the transaction. So one need to be very sure about the establishment of the service receiver. In the present case if the service receiver does not have a permanent establishment in India, there will be no service tax liability.