Trilok Singh Negi
(Querist) 25 March 2009
This query is : Resolved
we are a freight forwarding co. we have imported goods on behalf of our customer from Hongkong.The goods were moved frm Hongkong city to hongkong airport by the local agent. Do we have to charge service tax on the ex works charges or not because services are provided not in India but in Hongkong.Is there any circular for the same. Please let me Know
it is purely exported service. according to rule 3(ii) of Export of Service Rules,2005 and the rule 3(2)(a). if the service provided from india and used outside india it is defined as export service. and also read with notn.No.5/2008-S.T dated 01.03.2008 and Notn.No.20/2008 - S.T dated 10.05.2008. So, the service is defined under Export of Service and you need not to charge service tax on the ex work.
(Expert) 26 March 2009
rule 3(ii) of Export of Service Rules,2005 and the rule 3(2)(a). if the service provided from india and used outside india it is defined as export service. and also read with notn.No.5/2008-S.T dated 01.03.2008 and Notn.No.20/2008 - S.T dated 10.05.2008. So, the service is defined under Export of Service and you need not to charge service tax on the ex work. Export services work an not be taxed,If services are given to Hongkong not in India then no tax in india.
Subject: Applicability of the provisions of the Export of Services Rules, 2005 in certain situations
In terms of rule 3 (2) (a) of the Export of Services Rules 2005, a taxable service shall be treated as export of service if “such service is provided from India and used outside India” Instances have come to notice that certain activities, illustrations of which are given below, are denied the benefit of export of services and the refund of service tax under rule 5 of the Cenvat Credit Rules, 2004 [notification No. 5/2006-CE (NT) dated 14.03.2006] on the ground that these activities do not satisfy the condition ‘used outside India’,-
(i) Call centres engaged by foreign companies who attend to calls from customers or prospective customers from all around the world including from India;
(ii) Medical transcription where the case history of a patient as dictated by the doctor abroad is typed out in India and forwarded back to him;
(iii) Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange;
(iv) Foreign financial institution desiring transfer of remittances to India, engaging an Indian organisation to dispatch such remittances to the receiver in India. For this, the foreign financial institution pays commission to the Indian organisation in foreign exchange for the entire activity being undertaken in India.
The departmental officers seem to have taken a view in such cases that since the activities pertaining to provision of service are undertaken in India, it cannot be said that the use of the service has been outside India.
2. The matter has been examined. Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories:
(i) Category (I) [Rule 3(1)(i)] : For services (such as Architect service, General Insurance service, Construction service, Site Preparation service) that have some nexus with immovable property, it is provided that the provision of such service would be ‘export’ if they are provided in relation to an immovable property situated outside India.
(ii) Category (II) [Rule 3(1)(ii)] : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service, Security Agency service, Storage and Warehousing service) where the place of performance of service can be established, it is provided that provision of such services would be ‘export’ if they are performed (or even partly performed) outside India.
(iii) Category (III) [Rule 3(1)(iii)] : For the remaining services (that would not fall under category I or II), which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services), it has been specified that they would be ‘export’,-
(a) If they are provided in relation to business or commerce to a recipient located outside India; and
(b) If they are provided in relation to activities other than business or commerce to a recipient located outside India at the time when such services are provided.
3. It is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a legislation. Keeping this principle in view, the meaning of the term ‘used outside India’ has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and han
(Expert) 04 April 2009
Yes,I agree with my learned friends. Please try to follow their valuable opinions.