Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

whether Service tax is to be charged

New Joinee (none) (118 Points)

09 June 2008

engineering designing done in India for a customer outside India will attract Service tax or not?

Reply
Follow
Share

5 Replies

Tarun (CA Practice ) (166 Points)
Replied 10 June 2008

yes, the service tax will be charged.

Upgrade to CAclubindia Pro. Subscribe Now!

New Joinee (none) (118 Points)
Replied 10 June 2008

will it not be exempted under export of services?

cashekar (Chartered Accountant) (133 Points)
Replied 10 June 2008

First of all you have to verify whether the service is taxable, then we have to see if it is performance based or with relation to immovable property situated outside india.

There are three conditions to be satisfied for constituting a export of service. They are 1. Service provided from India and used outside India 2. payment to be recd in convertible foreign exchange. 3 when service provided has to be used by a recipient situated outside India.

In your case Engineering services with regard to the Rule 3 (i) of the Export of Service tax rules provides that services as provided in relation to immovable property situated outside India is treated as export of service rules.

Hence if all the three conditions are satisfied then it is treated as an export.

New Joinee (none) (118 Points)
Replied 10 June 2008

Thanks for the detailed explanation.

But one more clarification, it is engineering designing , drawings , calulations done in India for movable machines/ vessels etc to be produced and used outside India, so going by the 3 criteria mentioned , it should constitute export of services .. correct ?

cashekar (Chartered Accountant) (133 Points)
Replied 11 June 2008

In continuation to your clarification on export of services, as you are talking about a vessel.

Explanation to Rule 3 says ' for the purpose of this rule ' india' includes the designated areas in the Continental Shelf and Exculsive Economic Zone of India as declared by the notification of the Government of India in the Ministry of External affairs numbers S.O.429(E) dated the 18th July 1986 and S.O. (E) dated 19th September 1996.

As stated in my reply, I would like to reiterate that the 3 conditions need to be satisfied.

Thanks and regards

cashekar @ gmail.com