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Service tax liability on import of service

Roshani Jain (Employee) (155 Points)

12 March 2015

Dear All,

I have one doubt for which i need your help..

One of my client doing Import of Plant and Machinery from Japan and for the same company of japan providing extended warranty on that Plant & Machinery and the company is not charging any tax on that warranty so whether my client is liable to pay sevice tax under RCM basis for import of service (i.e Extend Warranty).

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6 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 12 March 2015

when there is no value for extended warranty service on what value service tax can be paid ? You said the company is not charging any Tax but whether the company is raising any invoice for the extended warranty service ? If so and if the services are rendered in India we have to pay Service Tax on the Import of Services

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Roshani Jain (Employee) (155 Points)
Replied 12 March 2015

Thank You Mr. Sivram.. Yes Service provider is raising invoice sepreately on extended warranty...

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 12 March 2015

Dear Roshni,

Under the Negative List regime, the activity of agreeing to an obligation, to refrain from an act, to tolerate an act or a situation or to carry out an act has been specifically included as a declared service u/s 66E of the FA,1994. Hence, the activity of extended warranty qualify as a service.

Futher,as per Rule 3 of Place of Provision Services(General Rule) , generally the place of provision of service is the place of service receipient (unless case covered by other rules) which is India.Therefore,such service is taxable in India as per Sec 66C of FA,1994.

Further,as per Rule 2(1)(d) of Service Tax Rules,1994 read wit Notification No. 30/2012 dated June 20,2012 in case of import of service in India the service recepient located in the taxable territory is liable to pay whole of service tax under RCM.

Conclusion-Service receiver liable to pay ST on extended warranty services under RCM.

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Roshani Jain (Employee) (155 Points)
Replied 12 March 2015

Thank you Saurabh,,can you tell what will be the rate of service tax that would be charged for this service?

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 12 March 2015

In my opinion there is no abatement or exemption for such decclared service therefore,12.36% will be charged.(New rate 14% as proposed by Finance Budget,2015 is applicable from the date to be notified by Central Govt after enactment of FA,2015).