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Service tax applicability on bpo

Abhai Srivastava (Financial Consultancy) (33 Points)

03 March 2013

As per Rule 4 of Service tax Rules 1994 second amendment, every person who is liable to pay tax has to obtain Registration. My question is particular about a BPO (A) providing services to client (B) in other country.

"A" gets some pdf files from "B" and "A" in turn converts them to a word file and send back to email of "B".

Is this transaction taxable and is "A" required to take registration ?

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6 Replies

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 03 March 2013

First of all, in order to register with service tax, there should be taxable service. Since in your case as er details provided by you, there is no taxable service income as far as service tax is concerned. the kind of service you are providing is export of service under service tax law and hence not to be part of taxable income. But in order to make your income to consider as export of service income, you must have to satisfy conditions prescribed under export of service Rule 2005. If all the conditions satisfied then your income considered as exempted service and you are out of perview of service tax.

Howver, once you are start providing service in india to your indian clients also, then You have to get registered for service tax once you crosses your taxable service income (means providing in idnai) above Rs. 9 lakhs. Government is very much happy if you take registration even before crossing taxable service value.

Thanks and Regards,

Manoj B. Gavali

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Abhai Srivastava (Financial Consultancy) (33 Points)
Replied 03 March 2013

Thanks Manoj for your reply. However would request your further inputs on the provisions of latest POP Rules 2012 as described below. In the light of belowsaid, i have interpretation, that it is taxable.

As per the Sub Rule (I) of Rule 2 (Definitions) of Place of Provision of Services Rules, 2012 (hereinafter referred as POP)

(I) “online information and database access or retrieval services” means

providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;

and as per Rule 9 (b) of POP, 2012

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

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

“RULE 6A. Export of services.-

(1) The provision of any service provided or agreed to be provided shall be treated as export of service when,-

Provision	Applicability
(a) the provider of service is located in the taxable territory ,	TRUE
(b) the recipient of service is located outside India,	TRUE
(c) the service is not a service specified in the section 66D of the Act,	TRUE
(d) the place of provision of the service is outside India,	confused in reference to above rules of POP
(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and	TRUE
(f) the provider of service and recipient of service are not merely, establishments of a distinct person in accordance with item (b) of Explanation 2 of clause (44) of section 65B of the Act	TRUE

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 03 March 2013

If you see Place of provision of service rules, 2012, rule 3 clearly spelt out as place of provision of service means "The place of provision of a service shall be the location of the recipient of service. Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service"

Since in your case, location of reciepient of service i.e. your customer is known outside india, you are complied with conditions prescribed as mentioned in export of service rules, 2005

Thanks and regards,

Manoj B. Gavali

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 03 March 2013

your service fall under Rule 9 of POP of Services Rules2012,so in this case place of provision is location of Service Provider and so you are proving a taxab service.But, you are protected by Rule 6A i.e export of services if you are receiving payment in foreign convertable currency.since you donot have liability to pay Service Tax registration is not necessary.

Rahul Mishra (Accounts Head) (37 Points)
Replied 23 January 2016

Its simple, Rule 9 is appliable on your case, hence Place of Provision of Service shall be location of service provider. You have to register for Service Tax once you cross Turnover of Rs 9 Lakhs and start paying ST once you cross 10 Lakhs. Once you cross 10 Lakhs you have to pay ST from next year on every rupee of turnover.