Service tax liability for a website programmer (export)

RULE 6A (1) - The provision of any service provided or agreed to be provided shall be treated as export of service when

a. the provider of service is located in the taxable territory

b. the recipient of service is located outside India

c. the service is not a service specified in the section 66D of the Act

d. the place of provision of the service is outside India

e. the payment for such service has been received by the provider of service in convertible foreign exchange; and

f. the provider of service and recipient of service are not merely establishment of a distinct person in accordance with item (b) of Explanation 2 of clause (44) of section 65B of the Act.

Conclution: your services are exempted from payment of service tax

Ya totally agreed with CA Jitender ...your  service is export as per ST Rules,1994.hence not taxable.

Further you can claim  refund of any CENVAT credit (input ST paid on input services)  as used in export services under  Rule 5 of Cenvat credit Rules,2004 under Notification No. 27/2012 dated 18.06.2012.

I have confusion regarding Place of Provision outside india can you Plz clarify that  

Thank you everyone for replies. Really appreciate.

@ Jitender and @ Saurabh: So according to you guys the ST is extempted. 

But I still want to clear one thing from you guys. I get all the funds in my Bank account in INR and not USD. The USD that is sent by my clients are sent to my PayPal account. PayPal is a online bank you can say which lets you accept payment in different currencies and then withdraw the money in local currency.

Once I withdraw my USDs, PayPal sends the funds in INR equivalent to the USD value that day on which I withdarwn the funds.PayPal sends these funds via NEFT to my Bank account (in INR).

So can I proove to ITO that the funds even if are received in INR are actually against the USD earned in PayPal? 

Let me know what you think?

@ Shiv Prakash, Place of provision (my client's company) is situated in London. Not sure what other clarification you need. Let me know.

@ Pranav Mishar, sorry but I didnt get what you said. Can you tell me what you mean by POPS?

Again, thank you everyone!

See Rohit,

The condition specified in Rule 6A means that the consideration for services must be receivable in convertible foreign currency....and thats what being credited to your paypal A/c.(1st story ends here only),  

Conversion of UDS into INR by Paypal is altogether a different thing which is post receipt of USD.Therefore, service is export service and also non-taxable as per Sec 66C since its place of prov is outside India.

Further,even if it is assumed that you are receiving consideration for services in INR, even then service is not taxable because the place of provision of service is outside India as per Rule 3 of Place of Prov of Service Rules( as rightly pointed out by CMA Pranav) .......and once the place of provision is outside India the service altogether get outside from Service Tax Net as per Sec 66C of FA,1994... ,however,in that case service will not qualify as export service(thereby you cannot claim export incentives). 

@ Saurabh,

So to clarify. Even though I am getting funds in INR to my bank via PayPal against the USD that I earned, I am exempted from paying Service Tax. Right?

And do I need to regsiter for service tax id even if I am exempted?

Thank you, your help was tremendous. No other CA I visted knew about this.

Ya Rohit your service is not taxable as per Sec 66C...

Registration-As per Sec 69 of FA,1994 every person liable to pay tax or person  crossing Rs. 9lacs  value of "taxable services" during the Financial yr is liable to obtain registration under ST law.

Since your services are non taxable as per Sec 66C , you need not  to obtain registration under ST law....ya voluantarily you may take registration(because the same will be benefical if you want to claim export benefits or in expansion of your business)